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

Pinghan Liang ()

MPRA Paper from University Library of Munich, Germany

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.

Keywords: Customer complaint management; Communication; Exit (search for similar items in EconPapers)
JEL-codes: D82 L15 L51 M31 (search for similar items in EconPapers)
Date: 2013
New Economics Papers: this item is included in nep-cta, nep-gth and nep-ind
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