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

Liang, Pinghan (2013): Exit and voice: a game-theoretic analysis of customer complaint management. Forthcoming in: Pacific Economic Review , Vol. 13, No. 3 (July 2013)

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.

• Item Type: MPRA Paper
• Language: English
• Keywords: Customer complaint management, Communication, Exit
• Subjects: D - Microeconomics > D8 - Information, Knowledge, and Uncertainty > D82 - Asymmetric and Private Information ; Mechanism Design; L - Industrial Organization > L1 - Market Structure, Firm Strategy, and Market Performance > L15 - Information and Product Quality ; Standardization and Compatibility; L - Industrial Organization > L5 - Regulation and Industrial Policy > L51 - Economics of Regulation; M - Business Administration and Business Economics ; Marketing ; Accounting ; Personnel Economics > M3 - Marketing and Advertising > M31 - Marketing

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