Choice Experiment Study on the Willingness to Pay to Improve Electricity Services

Modern forms of energy are an important vehicle towards poverty alleviation in rural areas of developing countries. Most developing countries’ households heavily rely on wood fuel which impact their health and social–economic status. To ease such a dependency, other modern forms of energy, namely electricity, need to be provided. However, the quality of the electricity service, namely reliability, is an important factor in reducing this dependency. This paper discusses a choice experiment valuation study conducted among electrified rural households located in Kisumu, Kenya, in which the willingness to pay (WTP) to avoid power outages or blackouts was estimated. A mixed logit estimation was applied to identify the various socioeconomic and demographic characteristics which determine preferences to reduce power outages among a household’s users. In conclusion, several of the socioeconomic and demographic characteristics outlined in this paper were identified and can assist service differentiation to accommodate the diverse households’ preferences towards the improvement of the electricity service. JEL Classification: Q56; C25