It’s not price; it’s quality : satisfaction and price fairness perception of electricity services in the urban Dominican Republic

Abstract

Poor quality infrastructure that is highly subsidized is also typically associated with political interference. In such a context, implementing cost-recovery tariffs, necessary to improve infrastructure services, represents a persistent challenge in developing countries. This paper examines how levels of end-user satisfaction and price fairness perception respond to different price-quality mixes of electricity services in the urban Dominican Republic. The analysis exploits a rich dataset, representative of informal and formal users, in a case study that provides significant variability of service characteristics (e.g., service reliability, commercial quality). I further exploit temporal variation in exposure to service improvements and electricity subsidies to evaluate if consumer attitudes change over time. The results suggest that the positive effect of improvements in service quality on satisfaction is greater than the negative effects of increasing prices and eliminating subsidies combined. In this case study, I find no evidence of attitude adaptation, suggesting that favorable views of service improvements have lasting effects. Overall, the results seem to suggest that price adjustments related to electricity service improvements permanently increase customer satisfaction.