Water Supply Security and Willingness to Pay to Avoid Drought Restrictions ∗

This paper studies Canberra households’ and businesses’ willingness to pay (WTP) to avoid drought water restrictions, using stated choice experiments. We find that customers evidence a lack of WTP to avoid most types of drought-induced restrictions. Respondents appear unwilling to pay to avoid low-level restrictions at all and to avoid higher levels of restrictions that are not in place every day. Given the option of watering on alternative days, customers appear willing to adjust their watering schedules compared with paying higher water bills and appear willing to tolerate high-level restrictions for limited periods each year, compared with higher water bills.