Valuing the Incremental Benefits of Groundwater Protection when Exposure Levels are Known

Both economic theory and psychological research indicate that benefit functions for reductions in health risk exposures may be conditional on current exposures. Using nitrates found in household wells, it is demonstrated that perceptions of health risks across exposure levels are affected by the individual's current exposure level, thus providing support for a conditional benefits function approach. Functions of conditional incremental benefits are estimated from a contingent valuation study of households that had been informed of their water test results. Incremental benefits reach a peak at an intermediate level of nitrates and then decline. Possible explanations for this non-convexity are provided.