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Exit and Voice: A Game-theoretic Analysis of Customer Complaint Management


  • Pinghan Liang


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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Suggested Citation

  • Pinghan Liang, 2013. "Exit and Voice: A Game-theoretic Analysis of Customer Complaint Management," Pacific Economic Review, Wiley Blackwell, vol. 18(2), pages 177-207, May.
  • Handle: RePEc:bla:pacecr:v:18:y:2013:i:2:p:177-207

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    References listed on IDEAS

    1. 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, July.
    2. Bougie, J.R.G. & Pieters, R. & Zeelenberg, M., 2003. "Angry customers don't come back, they get back : The experience and behavioral implications of anger and dissatisfaction in services," Other publications TiSEM 1708fb71-fd68-41d9-b870-e, Tilburg University, School of Economics and Management.
    3. Chrysanthos Dellarocas, 2006. "Strategic Manipulation of Internet Opinion Forums: Implications for Consumers and Firms," Management Science, INFORMS, vol. 52(10), pages 1577-1593, October.
    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.
    5. Canice Prendergast, 2002. "Consumers and Agency Problems," Economic Journal, Royal Economic Society, vol. 112(478), pages 34-51, March.
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    More about this item

    JEL classification:

    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
    • L15 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Information and Product Quality
    • L51 - Industrial Organization - - Regulation and Industrial Policy - - - Economics of Regulation
    • M31 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Marketing and Advertising - - - Marketing


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