Reports of Water Quality Violations induce Consumers to buy Bottled Water

The 1996 Safe Drinking Water Act Amendments require that water utilities send quality reports to customers. We test whether receiving WQRs of health violations increases purchases of bottled water. With new data, we find a larger response than previous studies, and, unlike previous studies, we disaggregate the intensive and extensive margins of demand changes. We find a water quality violation makes households 25% more likely to purchase bottled water, and, among purchasers, increase expenditures 4 − 7%. Therefore American consumers spend approximately $300 million dollars per year—about 4% of yearly bottled water expenditures— to avoid these health violations.