Association for Public Policy Analysis & Management

A main rationale for involving private providers in public service delivery is to harvest benefits such as lower costs and higher efficiency. However, markets for public services are quasi-markets in which information about alternative providers and their performance is often scarce. Can governments improve public service markets by collecting and revealing performance information about alternative providers? To address this question, the study uses a large N randomized survey experiment where the respondents are presented with performance information about alternative providers of the same service. We show that respondents’ perception of provider performance is systematically biased in favor of the private sector, and that exposure to performance information does not remedy this bias. The findings suggest that governments will find it difficult to improve public services markets by making information available because recipients interpret this information in a biased way. Implications for research and practice, including possible solutions, are discussed.