Can consumer complaints reduce product reliability? Should we worry?

Joaquin Coleff

No 11038, Documentos de Trabajo from Universidad del Rosario

Abstract: Abstract: We analyze a monopolist’s pricing and product reliability problem when consumers are entitled to product replacement but have heterogeneous cost of exercising this right, and we assess the implications of a decrease in consumers’ claiming cost on reliability, profit, and welfare. We find that reducing consumers’ claiming cost may reduce reliability and increase profit. Additionally, the model can explain why some firms encourage consumers to complain while others discourage consumers can explain why some firms encourage consumers to complain while others discourage consumers sumers’ claiming cost are relatively low and the firm prefers to promote complaints; consequently we find that encouraging complaints will eventually increase welfare.

Keywords: Product reliability; consumer complaints; liability cost; warranty (search for similar items in EconPapers)
JEL-codes: D21 D42 K41 L10 (search for similar items in EconPapers)
Pages: 19
Date: 2013-12-02
New Economics Papers: this item is included in nep-mkt
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http://repository.urosario.edu.co/bitstream/handle/10336/10968/11038.pdf

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Journal Article: Can consumer complaints reduce product reliability? Should we worry? (2020)
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Persistent link: https://EconPapers.repec.org/RePEc:col:000092:011038

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