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Abstract
Risk is an important attribute of goods, whereby the utility derived from that
attribute is determined by one's attitude to risk. We develop a novel approach
to leverage data on risk attitudes from a fully incentivized risk elicitation task to
model intrinsic riskiness of alternatives in a choice experiment. In a door-to-door
survey, 981 respondents participated in a discrete choice experiment to elicit pref-
erences over alternative sources of municipal water, conditional on water price and
quality. Additional source attributes, such as supply risks due to the water source
being weather dependent or technology risks are treated as intrinsic as they cannot
be plausibly disassociated from the water supply source. The risk task allows the
estimation of a coefficient of constant relative risk aversion (CRRA) for an indi-
vidual, which is incorporated into the preference estimation to test the hypotheses
that supply risk and new technology risk are important intrinsic attributes for new
water sources. Participants are not given information about supply or technological risks of the sources to avoid framing effects driving the results. Controlling
for water quality and cost, we find that supply risk is an important determinant of
participants' choices, while respondents are not concerned about technology risk.