Not all about the money: Service quality information improves consumer decision-making

Janneke Blijlevens, Swee-Hoon Chuah, Ananta Neelim, Johanna E. Prasch and Ahmed Skali

Journal of Economic Behavior & Organization, 2024, vol. 228, issue C

Abstract: Information asymmetries are pervasive in many industries and can result in large losses in consumer welfare. Does providing product quality information result in improved consumer decision-making? We study this question in a market where quality is notoriously hard to determine ex ante: the residential energy market. Using a discrete choice experiment (N = 1,002), we document a substantial willingness-to-pay (37–45 % of the median bill) for four service quality attributes (transparency, agency, authenticity, and convenience). In an incentivized search task (N = 432), we show that how quality information is presented matters: consumers who view information in the form of ratings and stamps of approval are (i) 4 % more likely to opt in to the search task, and (ii) 20 % more likely to correctly identify given levels of quality, relative to consumers who are provided with bar graphs, pie charts, and text. Finally, using a decision experiment (N = 510) with real company names familiar to our participants, we find that the provision of quality information increases choices of the best-rated company more than 20-fold, relative to the control scenario where quality information is absent, in which consumers select companies predominantly on price and brand awareness. Our findings are applicable to other markets in which information asymmetries are present, where policymakers should consider interventions that promote transparency and quality information provision.

Keywords: Energy markets; Service quality attributes; Decision-making; Presentation of information; Informed decisions (search for similar items in EconPapers)
JEL-codes: D12 D18 D83 M31 (search for similar items in EconPapers)
Date: 2024
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Persistent link: https://EconPapers.repec.org/RePEc:eee:jeborg:v:228:y:2024:i:c:s0167268124003834

DOI: 10.1016/j.jebo.2024.106769

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