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The Power of Apology

Author

Listed:
  • Johannes Abeler

    (University of Nottingham)

  • Juljana Calaki

    (University of Bonn)

  • Kai Andree

    (University of Potsdam)

  • Christoph Basek

    (University of Bonn)

Abstract

After an unsatisfactory purchase, many firms are quick to apologize to customers. It is, however, not clear why they should do that. As the apology is costless, it should be regarded as cheap talk and thus ignored by the customer. In this paper, we test in a controlled field experiment whether apologizing inuences customers' subsequent behavior. We find that apologizing yields much better outcomes for the firm than offering a monetary compensation.

Suggested Citation

  • Johannes Abeler & Juljana Calaki & Kai Andree & Christoph Basek, 2009. "The Power of Apology," Discussion Papers 2009-12, The Centre for Decision Research and Experimental Economics, School of Economics, University of Nottingham.
    • Handle: RePEc:not:notcdx:2009-12
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    References listed on IDEAS

    as
    1. Patrick Bajari & Ali Hortaçsu, 2004. "Economic Insights from Internet Auctions," Journal of Economic Literature, American Economic Association, vol. 42(2), pages 457-486, June.
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    3. Ai, Chunrong & Norton, Edward C., 2003. "Interaction terms in logit and probit models," Economics Letters, Elsevier, vol. 80(1), pages 123-129, July.
    Full references (including those not matched with items on IDEAS)

    Citations

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    Cited by:

    1. Benjamin Ho, 2012. "Apologies as Signals: With Evidence from a Trust Game," Management Science, INFORMS, vol. 58(1), pages 141-158, January.
    2. Huang, Lidingrong, 2021. "Do not apologise too early," Journal of Behavioral and Experimental Economics (formerly The Journal of Socio-Economics), Elsevier, vol. 90(C).
    3. Srivastava, Vatsalya, 2017. "The Sorry Clause (revision of CentER DP 2016-008)," Discussion Paper 2017-002, Tilburg University, Center for Economic Research.
    4. Basil Halperin & Benjamin Ho & John A List & Ian Muir, 2022. "Toward An Understanding of the Economics of Apologies: Evidence from a Large-Scale Natural Field Experiment," The Economic Journal, Royal Economic Society, vol. 132(641), pages 273-298.
    5. Srivastava, Vatsalya, 2016. "The Sorry Clause," Other publications TiSEM 51d65f16-812c-4fbd-9cd2-f, Tilburg University, School of Economics and Management.
    6. Luís Cabral & Lingfang (Ivy) Li, 2015. "A Dollar for Your Thoughts: Feedback-Conditional Rebates on eBay," Management Science, INFORMS, vol. 61(9), pages 2052-2063, September.
    7. Fischbacher, Urs & Utikal, Verena, 2013. "On the acceptance of apologies," Games and Economic Behavior, Elsevier, vol. 82(C), pages 592-608.
    8. Ben Gilbert & Alexander James & Jason F. Shogren, 2018. "Corporate apology for environmental damage," Journal of Risk and Uncertainty, Springer, vol. 56(1), pages 51-81, February.
    9. Lingfang (Ivy) Li & Erte Xiao, 2014. "Money Talks: Rebate Mechanisms in Reputation System Design," Management Science, INFORMS, vol. 60(8), pages 2054-2072, August.
    10. Friehe, Tim & Hippel, Svenja & Schielke, Anne, 2021. "Appeasing yourself or others? – The use of self-punishment and compensation and how it influences punishment," Journal of Economic Psychology, Elsevier, vol. 84(C).
    11. Maxime C. Cohen & Michael D. Fiszer & Baek Jung Kim, 2022. "Frustration-Based Promotions: Field Experiments in Ride-Sharing," Management Science, INFORMS, vol. 68(4), pages 2432-2464, April.
    12. Srivastava, Vatsalya, 2017. "The Sorry Clause (revision of CentER DP 2016-008)," Other publications TiSEM 252e9410-4c9f-4a40-9ab7-a, Tilburg University, School of Economics and Management.
    13. Srivastava, Vatsalya, 2016. "The Sorry Clause," Discussion Paper 2016-004, Tilburg University, Tilburg Law and Economic Center.
    14. Srivastava, Vatsalya, 2016. "The Sorry Clause," Other publications TiSEM 9340f3b1-ebf3-46b9-8ffd-3, Tilburg University, School of Economics and Management.
    15. Srivastava, Vatsalya, 2017. "The Sorry Clause (Revision of TILEC DP 2016-004)," Discussion Paper 2017-002, Tilburg University, Tilburg Law and Economic Center.
    16. Srivastava, Vatsalya, 2016. "The Sorry Clause," Discussion Paper 2016-008, Tilburg University, Center for Economic Research.
    17. Verena Utikal, 2013. "I am sorry - Honest and fake apologies," TWI Research Paper Series 81, Thurgauer Wirtschaftsinstitut, Universität Konstanz.
    18. Ruchdee Binmad & Mingchu Li & Zhen Wang & Nakema Deonauth & Chettupally Anil Carie, 2017. "An Extended Framework for Recovering From Trust Breakdowns in Online Community Settings," Future Internet, MDPI, vol. 9(3), pages 1-13, July.
    19. Sabrina Strang & Verena Utikal & Urs Fischbacher & Bernd Weber & Armin Falk, 2014. "Neural Correlates of Receiving an Apology and Active Forgiveness: An fMRI Study," PLOS ONE, Public Library of Science, vol. 9(2), pages 1-7, February.
    20. Srivastava, Vatsalya, 2017. "The Sorry Clause (Revision of TILEC DP 2016-004)," Other publications TiSEM 5925920e-05c6-4ae0-8e76-d, Tilburg University, School of Economics and Management.
    21. Elias L Khalil & Nick Feltovich, 2018. "Moral licensing, instrumental apology and insincerity aversion: Taking Immanuel Kant to the lab," PLOS ONE, Public Library of Science, vol. 13(11), pages 1-24, November.
    22. Wei, Chuang & Liu, Maggie Wenjing & Keh, Hean Tat, 2020. "The road to consumer forgiveness is paved with money or apology? The roles of empathy and power in service recovery," Journal of Business Research, Elsevier, vol. 118(C), pages 321-334.

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    More about this item

    Keywords

    Apology; Credulity; Natural Field Experiment;
    All these keywords.

    JEL classification:

    • C93 - Mathematical and Quantitative Methods - - Design of Experiments - - - Field Experiments
    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
    • L81 - Industrial Organization - - Industry Studies: Services - - - Retail and Wholesale Trade; e-Commerce

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