Abstract
In urban areas, people face various kinds of environmental risks. We have to know the economic value of the risks properly when we implement public investment that may cause the environmental damage.
In this paper, we review the General Preference Index Model, a derivative from the Substitution Model of Choice and Value for evaluating environmental risks and apply it to the case of drinking water. We investigate the relation between the revealed choice and the consciousness of risk with a questionnaire.
The followings are the conclusions of the paper. First, according to the model, WTP depends on the distribution of the probability of hazards and the cost function. Second, the questionnaire implies that the model almost fits the structure of the drinking water choice, although the revealed choice of the private good doesn't always show the consciousness of the risk. Third, by using the General Preference Index Model, we calculate the WTP for the investment for high-level purification of drinking water. It is 235, 166 yen per year.
