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How consumers’ socio-economic background influences satisfaction: Insights for better utility regulation

Clifton, Judith and Díaz-Fuentes, Daniel and Fernández-Gutiérrez, Marcos (2013): How consumers’ socio-economic background influences satisfaction: Insights for better utility regulation.

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Abstract

Augmenting consumer welfare was a key justification behind the reform of utilities from the 1980s. But, three decades later, evidence is mounting that consumer satisfaction with household utilities is quite uneven. Moreover, governments, regulators and international organizations are increasingly recognizing that consumers from specific socio-economic backgrounds may be less satisfied than those from other backgrounds. To attend to this, instances of demand-side regulation have been implemented, but there remains a lack of empirical research on the precise links between consumers’ socio-economic background and their satisfaction. This article contrasts consumers’ stated and revealed preferences for three major household utility services (electricity, gas and telecommunications, including internet) across twelve European countries. Contrasting stated and revealed preferences has been applied to policy on transportation, marketing and the environment: this article pioneers the application of this technique to the analysis of satisfaction with household utilities across multiple countries. We find strong evidence that consumers’ socio-economic category matters: consumers with lower levels of education, the elderly and those who are not employed exhibit particular expenditure patterns and lower satisfaction levels vis-à-vis some of or all the services under analysis. We conclude by highlighting how our findings may be of use to regulators in the ongoing quest to improve the quality of utility regulation.

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