This dissertation studies the strategic choices made by both governments and private citizens in relation to impairment of water quality over both surface and drinking water in the United States. In the first chapter, I investigate whether delegating responsibility for surface water quality management to state governments generates negative externalities against downstream neighboring states. To separate the effect of state-level policy from other sources of water quality variation, I rely on the staggered roll-out of state water management programs under the Clean Water Act to conduct a difference-in-difference analysis. I find that water quality declines in downstream states in response to upstream decentralization, but that the effect is not concentrated at borders. I additionally investigate whether interstate water compacts and political cooperation reduce cross-state spillovers. I find evidence that interstate cooperative agreements have modest success in serving as a hybrid between state and federal jurisdiction: I find no evidence of political cooperation. In my second chapter, co-authored with Felipe Flores Golfin, we evaluate potential benefits of drinking water infrastructure investments in the United States. We first estimate willingness-to-pay for high-quality drinking water using consumer avoidance behavior in response to health-based drinking water quality violations. We find a modest but statistically significant increase in bottled water purchases in the year in which a county has at least one active violation. We then estimate a household-level discrete choice model of drinking water. We find that the average household is willing to pay $162 per year to avoid a one standard deviation decrease in water quality. We additionally find that WTP for bottled water increases in income. We further discuss how our estimates suggest that consumer preferences strongly justify major increases in water infrastructure investments in the United States.