In developing countries, Millions of people are facing daily problems In obtainingrnwater for domestic purposes.rnrecognizing the harm to health economic productivity, And quality of livingrnstandard tat can result from inadequate water supplies, governments have beenrnestablishing policy and planning to correct the problem.rnthe implementation of such policy decisions should focus on demand sides rnopposed to the traditional focus on supply side, Pricing mechanisms and regulatoryrnmeasures that have received much less attention. since need to fill the gap ofrninformation on the demand side (Such as household socioeconomic andrndemographic characteristics and characteristics of the existing and new supplies ofrnwater) for policy purpose is timely, researching the demand side in order tornunderstand the household improved water demand behavior and what factorsrndetermine their willingness to pay verses their affordability for upgraded waterrnservice is crutial.rnthis article, Therefore, Tries to asses the determinants of households willingness tornpay and demand for improved water services in harar town which will enablernpolicy makers to design an appropriate water pricing structure and viable costrnrecovery policies lature of the primary cross-sectional data that we got from ourrncontingent valuation survey in the town, this study used only the direct method tornestimate households' willingness to pay for ordered probit models.rnthe study shows that the methodology produced some Illuminating Insights Intornthe relevant information on household willingness to pay, Which is shown to varyrnsignificantly according to household level of income, education level and sex of thernhousehold head, Starting point of the bidding game, location of study site, mainrnsource o water for the household and perceived quality of the existing water.rnthe study also reveals that the mean willingness to pay (Wtp) for private pipedrnimproved water connection is more than 15 times the exiting authority's tariff rate.rnthe tariffs for improved water can be increased substantially with unconstrainedrnsupply before insignificant numbers of households would choose not to connect tornan improved system. The revenue and households' Welfare gains in changing thernexisting policy (Low tariff with few unreliable private service) to a new policy (Higherrntariff with more and Improved private connections) can be huge .