Adequacy and quality are crucial for household water supply. One of the major problems withrnpublic utilities such as drinking water in developing countries is intermittent, insufficient andrnunreliable supply. Bahir Dar is no exception to this. To combat these problems, householdrnengage in a variety of averting behaviors. Some of the major strategies are storing, treating andrnpurchasing The study uses the combination of contingent valuation and averting expenditurernapproaches to examine the relationship between selected socio-economic characteristics ofrnhousehold and their willingness to pay for the improved water service and for water qualityrnimprovement A single bounded close endedfollowed by open ended question was used to obtainrnHousehold's WTP for the improved water service. The study used survey data Fom 246rnHousehold randomly selected Fom Bahir Dar town and the Probit, OLS and Multinomial Logitrnregression technique was used to estimate the effects of selected exogenous variables onrnwillingness to pay. The survey result also shows that mean willingness to pay for one bucket orrnfor 20 liter of improved water service is 14.21 and 14.96 cents according to the dichotomousrnchoice and open-ended survey responses respectively. The total willingness to pay for one bucketrnor 20 liters of improved water services is Birr 4,160.52 per day or Birr 1,518,588.41 per year.rnThe results of the econometrics model show that household income, quality and type of waterrnsource, children age less than or equal to three and level of education, and age of the head ofrnthe household are the principal factors influencing willingness. This suggestsÂ· ihat, anyrngovernment policy which increases factors that will increase household's willingness willrnincrease their willingness to pay. In addition, because consumers ' income is associated withrntheir willingness to pay, it is suggested that policy on user fees recognize income inequalitiesrnwhen determining the amount that household should pay.