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Exit and voice: a game-theoretic analysis of customer complaint management

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  • Liang, Pinghan

Abstract

We develop a multi-agent communication model with participation decisions to address the customer complaining behavior and the corresponding management policy. Privately informed customers choose among costly complain, keep silence, and exit, and a firm decides complaining barriers and whether to undertake a corrective action. It is shown that customers truthfully complain only under a moderate complaining barrier. The observed low complaint/dissatisfaction ratio and costly complaint arise as one equilibrium outcome. Customers' expectations, the precision of signals, and the temptation of outside options are identified as the determinants of complaint management policy. Firms are likely to set socially excessive complaining barriers.

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Bibliographic Info

Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 45268.

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Date of creation: 2013
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Handle: RePEc:pra:mprapa:45268

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Keywords: Customer complaint management; Communication; Exit;

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  1. Chrysanthos Dellarocas, 2006. "Strategic Manipulation of Internet Opinion Forums: Implications for Consumers and Firms," Management Science, INFORMS, vol. 52(10), pages 1577-1593, October.
  2. John C. Harsanyi & Reinhard Selten, 1988. "A General Theory of Equilibrium Selection in Games," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262582384, December.
  3. Canice Prendergast, 2002. "Consumers and Agency Problems," Economic Journal, Royal Economic Society, vol. 112(478), pages C34-C51, March.
  4. Halstead, Diane & Morash, Edward A. & Ozment, John, 1996. "Comparing objective service failures and subjective complaints : An investigation of domino and halo effects," Journal of Business Research, Elsevier, vol. 36(2), pages 107-115, June.
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