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Customer Anger and Incentives for Quality Provision

Anthony Heyes () and Sandeep Kapur

No 1215, Birkbeck Working Papers in Economics and Finance from Birkbeck, Department of Economics, Mathematics & Statistics

Abstract: Emotions are a significant determinant of consumer behaviour. A customer may get angry if he feels that he is being treated unfairly by his supplier and that anger may make him more likely to switch to an alternative provider. We model the strategic interaction between firms that choose quality levels and anger-prone customers who pick their supplier based on their expectations of suppliers' quality. Strategic interaction can allow for multiple equilibria including some in which no firm invests in high quality. Allowing customers to voice their anger on peer-review fora can eliminate low-quality equilibria, and may even support a unique equilibrium in which all firms choose high quality.

Keywords: anger; customer attrition; quality (search for similar items in EconPapers)
JEL-codes: D03 D11 L15 (search for similar items in EconPapers)
Date: 2012-08
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https://eprints.bbk.ac.uk/id/eprint/5944 First version, 2012 (application/pdf)

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