Paper. Regulation of Public Infrastructure Services, insights from Behavioural Economics

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I paper dell’Osservatorio (ISSN 2280-8698), December 2014, P 3/2014

M. Fernández-Gutiérrez, D. Díaz-Fuentes

Improving Regulation of Public Infrastructure Services from the Consumer Perspective:
Insights from Behavioural Economics

Abstract

Due to the intense market-oriented reform introduced during the last decades, particularly in the EU context, public infrastructure services have experienced deep recent changes in their modes of organisation and regulation. A key aim of market-oriented reforms was to introduce competition and further opportunities for choice, which was expected to increase citizens’ satisfaction in their role as consumers. Nevertheless, the regulation of these markets after the reforms has proven to be more complex than first thought, whilst significant problems from the perspective of consumers have been detected. In this light, international organizations and regulators and policy makers are paying increasing attention to the new insights on consumer behaviour derived from Behavioural Economics. Regulators and policy makers are considering how a deeper understanding of consumers’ behaviour may be translated into specific regulatory policies from the consumer perspective, as a complement to the more traditional competition policies, aiming to improve consumers’ well-being and satisfaction. In this context, a crucial concern is whether, due to the increasing complexity of the markets, certain groups of consumers (the so-called “vulnerable consumers”) may be at a isadvantaged position for taking satisfactory consumption decisions in the market place. However, further empirical evidence is required on the relation between consumers’ socioeconomic characteristics, behaviour and satisfaction, aiming at establishing which kind of regulatory policies may be applied and, in case, in which markets and socioeconomic dimensions they should focus.

The objective of this paper is to analyse the differences in consumers’ decisions and attitudes in the markets of public infrastructure services, focusing on three socio-economic dimensions representative of potential vulnerability: education, age and employment. To this aim, this paper contrasts information on citizens’ revealed preferences (expenditure decisions), obtained from national Household Budget Surveys, and stated preferences (satisfaction with price), obtained from the last Eurobarometer on Services of General Interest. The paper focuses on two essential services (electricity and telecommunications) and on three different large European countries (Italy, Spain and the UK) where comparable information is available. The results obtained show that, for some of the services and socioeconomic dimensions under analysis, potentially vulnerable consumers exhibit particular difficulties for satisfactory decision making, reflected in lower satisfaction associated to different expenditure decisions. However, the characteristics of the service and other contextual factors also demonstrate to play a significant role for explaining the distinctive features observed. Insights from Behavioural economics provide a useful base for interpreting these results. The empirical evidence obtained from this paper, combined with a Behavioural economics approach, permits to obtain some clear recommendations for improving results of regulation from the point of view of consumer satisfaction, by focusing on incorporating citizens’ heterogeneity as consumers.

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MARCOS FERNÁNDEZ GUTIÉRREZ

Marcos Fernández-Gutiérrez is Assistant Lecturer (Profesor Ayudante Doctor) in the Department of Economics at the University of Cantabria, accredited as Lecturer (Profesor Contratado Doctor) by the University Regulatory Agency of Spain. He has a BA in Economics from the University of Cantabria (with the Extraordinary Award in Academic Excellence), a MA in Public Policy from the Universitat Pompeu Fabra-The Johns Hopkins University and a European PhD from the University of Cantabria (having obtained the Prize of the University Social Council to the best thesis of the year in Social sciences). He has also been Visiting Research Fellow at the Universidad de Barcelona (Spain), the Università degli Studi di Milano (Italy) and the University of Exeter (UK). His research interests are public services regulation from the citizens’ perspective and the analysis of the influence of socio-economic characteristics on the use and consumption of public services from a Behavioural economics perspective. Marcos Fernández-Gutiérrez has published his research in journals as Regional Studies, Journal of Regulatory Economics, Educación XX1, International Review of Applied Economics, Annals of Public and Cooperative Economics, Revista de Educación, Revista de Economía Mundial, Investigaciones Regionales and CIRIEC-España Revista de Economía Pública, Social y Cooperativa and has written several books and book chapters. He has presented his research papers in more than fifty national and international conferences. In addition, he has participated in competitive research projects financed by the European Commission (Seventh Framework Programme) and the Spanish Ministry of Science and Innovation.

 

DANIEL DÍAZ-FUENTES

Daniel Díaz Fuentes (PhD in Economics 1992-Alcalá -Madrid is Professor of Economics at the University of Cantabria and Visiting Fellow at Cornell University – Department of Policy Analysis and Management. Previously, he has been lecturer at the Universities of Oxford (1993-1995), Carlos III (1990-1993), Alcalá de Henares-Instituto Nacional de Administración Pública (1989-1990) y Buenos Aires (1986-1988). He has been Visiting Fellow and Senior Associated Member at the European University Institute RSCAS (Robert Schuman Centre for Advanced Studies) (2006-2007) and the Universities of Manchester-UMIST (1999), LSE (1996), Oxford (1993-1995) y Michigan (1992). His main research interests are Fiscal and Monetary Policy, Technology and Employment, Privatization and Regulation of Public Services, International Finance of Infrastructure, Foreign Direct Investment and Economic Development in Latin America, Europe and International Institutions. He has been consultant for the United Nations (UNCTAD), OECD, European Commission, European Investment Bank, European Centre of Public Enterprises and Fundación Empresa Pública. He has published papers in several specialized journals as Regional Studies, Journal of Regulatory Economics, Utilities Policy, Annals of Public and Cooperative Economics, Journal of European Public Policy, Public Management Review, Journal of Common Market Studies, International Review of Applied Economics, Business History, Global Policy, Emerging Market Finance and Trade, Journal of Comparative Policy Analysis, and Revista de Economía Mundial and edited books in prestigious publishers as Palgrave-Macmillan, Routledge, Kluwer, Ashgate, Peter Lang, Springer-Verlag, United Nations Press, Harvard University Press, Fondo de Cultura Económica, Síntesis and Instituto de Estudios Fiscales. He has been main researcher in diverse international research projects 2011-14 (European Science Foundation – COST: “The emergence of Southern Multinationals; European Commission-VII FP: “COCOPS- Coordination for the Cohesion of the Public Services of the Future; European Investment Bank: EIBURS: The History of European Finance of Infrastructure) and national projects financed by the Spanish Ministry of Science and Innovation.

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