Service quality and prospects for benchmarking: Evidence from the Peru water sector

Service quality is a very important aspect of the water and sewerage industry. Empirical studies have tended to focus on production costs, without explicitly introducing key dimensions of quality. Using data from the Peruvian water sector (1996-2001), this study examines how the introduction of quality variables affects performance comparisons across utilities. The research presents different specifications of stochastic cost frontier models to illustrate how quality can be incorporated into benchmarking studies.