The Enduring Role of Sector: Citizen Preferences in Mixed Markets

Abstract

Abstract What role does sector play in citizens’ perceptions of products or services in mixed-market settings where governments compete with for-profit and nonprofit vendors or when governments partner or contract with private-sector providers? Do the public and nonprofit sectors have an advantage over for-profit providers? Using choice-based conjoint analysis with a nationally representative paid consumer panel, we examine the relevance of sector to consumers and compare it other signals of quality; namely, price, third-party certifications, and consumer ratings. Of these, subjects are most sensitive to information from consumer ratings. Regarding sector, we find that subjects generally prefer nonprofit to government providers and government to for-profit providers. Sector is most relevant to consumers in low-information environments when the quality of a product or service is otherwise unclear. We extend theory by proposing four possible mechanisms for the differential value of sector to consumers (process quality, product quality, expertise quality, and moral quality).