Information transparency, choice confidence, and customer retention: field and laboratory evidence from markets for credence goods

Cheng, Zhi (Aaron), Ting Li and Paul A. Pavlou

LSE Research Online Documents on Economics from London School of Economics and Political Science, LSE Library

Abstract: How does information transparency affect customer retention in markets where quality is difficult to verify? Conventional wisdom suggests that transparency intensifies price competition and increases customer churn. We challenge this view by showing that acquisition-stage transparency can strengthen retention in markets for credence goods characterized by delayed feedback and persistent uncertainty, where customers revisit their decisions without clear quality signals. We develop a transparency-confidence-retention framework, in which transparency at acquisition builds choice confidence, a psychological switching cost that anchors customers to their initial decisions. Using 83,835 auto insurance contracts from a European insurer and multiple identification strategies, we find that customers acquired through transparent channels are 4.6%–11.8% less likely to churn than those acquired through less transparent channels. A randomized, controlled experiment with 1,515 participants shows that transparency reduces customer churn primarily by strengthening choice confidence rather than increasing conventional switching costs, such as brand trust or product fit. Decomposing transparency into attribute, comparative, and evaluative dimensions reveals that evaluative transparency exerts the strongest influence. Analyses of boundary conditions indicate that the retention effect of transparency is amplified when public and private signals remain congruent with earlier informational cues. These findings reconceptualize transparency as a relational mechanism that fosters decisional assurance and stabilizes retention under quality uncertainty.

Keywords: information transparency; choice confidence; customer retention; switching costs; credence goods (search for similar items in EconPapers)
JEL-codes: J50 L81 (search for similar items in EconPapers)
Date: 2026-10-22
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Published in Management Science, 22, October, 2026. ISSN: 0025-1909

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