Low-Level Versus High-Level Equilibrium in Public Utility Services
Heterogeneity of public utility services is common in developing countries. In a "high-level" equilibrium, the quality of utility services is high, consumer willingness to pay for services is high, the utility is well funded and staff wel...
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| Format: | Policy Research Working Paper |
| Language: | English |
| Published: |
2012
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| Subjects: | |
| Online Access: | http://www-wds.worldbank.org/external/default/main?menuPK=64187510&pagePK=64193027&piPK=64187937&theSitePK=523679&menuPK=64187510&searchMenuPK=64187283&siteName=WDS&entityID=000158349_20110630160244 http://hdl.handle.net/10986/3487 |
| Summary: | Heterogeneity of public utility services
is common in developing countries. In a
"high-level" equilibrium, the quality of utility
services is high, consumer willingness to pay for services
is high, the utility is well funded and staff well paid in
order to induce high quality of performance. In a
"low-level" equilibrium the opposite is the case.
Which alternative occurs depends on both the quality of
utility management, and public perceptions about service
quality. If a utility administration has the potential to
offer high-quality service, and the public is aware of this,
high-quality equilibrium also requires the public s service
payments to be high enough to fund the needed pay incentives
for the utility staff. When the public lack knowledge about
the utility administration s quality, the public s initial
beliefs about the utility administration s quality also will
influence their willingness to make adequate service
payments for a high-quality equilibrium. This paper shows
that, with low confidence, only a low-level equilibrium may
exist; while with higher initial confidence, a high-level
equilibrium become possible. "Intermediate" (in
between the low- and high-level) outcomes also can occur in
early periods, with "high-level" outcomes later on. |
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