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Money isn’t all that matters: The use of financial compensation and apologies to preserve relationships in the aftermath of distributive harm

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  • Haesevoets, Tessa
  • Reinders Folmer, Chris
  • De Cremer, David
  • Van Hiel, Alain

Abstract

Previous studies have shown that when a recipient suffers from financial harm, allocators can use repair strategies that address financial or relational interests to promote relationship repair. Research to date, however, has neglected to study the effects of financial and relational strategies on relationship preservation simultaneously. In the present contribution, we examine this question. Based on the equality norm, we hypothesized that a financial compensation that fails to redress the harm suffered by the recipient (i.e., undercompensation) will be less effective in preserving a relationship than a financial compensation that do redress it (i.e., equal compensation and overcompensation). Moreover, we expected that relational strategies (i.e., apologies) would promote relationship preservation in contexts where the financial compensation alone is insufficient to redress the harm to the recipient, thus in cases of undercompensation. The results of a pilot study and a lab experiment using the dictator game confirmed our hypotheses. Consequently, our studies demonstrate that even in purely economic settings, relational strategies (i.e., apologies) can facilitate relationship preservation over and above financial strategies (i.e., financial compensation).

Suggested Citation

  • Haesevoets, Tessa & Reinders Folmer, Chris & De Cremer, David & Van Hiel, Alain, 2013. "Money isn’t all that matters: The use of financial compensation and apologies to preserve relationships in the aftermath of distributive harm," Journal of Economic Psychology, Elsevier, vol. 35(C), pages 95-107.
  • Handle: RePEc:eee:joepsy:v:35:y:2013:i:c:p:95-107
    DOI: 10.1016/j.joep.2013.02.003
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    References listed on IDEAS

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    Cited by:

    1. Desmet, Pieter T.M. & Leunissen, Joost M., 2014. "How many pennies for your pain? Willingness to compensate as a function of expected future interaction and intentionality feedback," Journal of Economic Psychology, Elsevier, vol. 43(C), pages 105-113.
    2. Nebojša Janićijević & Panta Kovačević & Ivana Petrović, 2015. "Identifying Organizational Factors Of Job Satisfation: The Case Of One Serbian Company," Economic Annals, Faculty of Economics, University of Belgrade, vol. 60(205), pages 73-104, April – J.
    3. Haesevoets, Tessa & Van Hiel, Alain & Reinders Folmer, Chris & De Cremer, David, 2014. "What money can’t buy: The psychology of financial overcompensation," Journal of Economic Psychology, Elsevier, vol. 42(C), pages 83-95.
    4. Tessa Haesevoets & Alain Van Hiel & Mario Pandelaere & Dries H. Bostyn & David De Cremer, 2017. "How much compensation is too much? An investigation of the effectiveness of financial overcompensation as a means to enhance customer loyalty," Judgment and Decision Making, Society for Judgment and Decision Making, vol. 12(2), pages 183-197, March.

    More about this item

    Keywords

    Financial compensation; Apology; Equality norm; Relationship preservation; Dictator game;

    JEL classification:

    • D23 - Microeconomics - - Production and Organizations - - - Organizational Behavior; Transaction Costs; Property Rights

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