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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).

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  • 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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    1. repec:cup:judgdm:v:12:y:2017:i:2:p:183-197 is not listed on IDEAS
    2. 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.
    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.
    5. Tessa Haesevoets & Chris Reinders Folmer & Alain Van Hiel, 2015. "Is Trust for Sale? The Effectiveness of Financial Compensation for Repairing Competence- versus Integrity-Based Trust Violations," PLOS ONE, Public Library of Science, vol. 10(12), pages 1-13, December.
    6. Nebojša Janićijević & Panta Kovačević & Ivana Petrović, 2015. "Identifying Organizational Factors Of Job Satisfation: The Case Of One Serbian Company," Economic Annals, Faculty of Economics and Business, University of Belgrade, vol. 60(205), pages 73-104, April – J.
    7. Inda Premordia & Timea Gál, 2021. "Dear Customer, Thank You for Your Review: The Service Failure-recovery Dyadic Interactions in the Restaurant Industry," International Review of Management and Marketing, Econjournals, vol. 11(3), pages 49-57.

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    More about this item

    Keywords

    Financial compensation; Apology; Equality norm; Relationship preservation; Dictator game;
    All these keywords.

    JEL classification:

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

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