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Customer Anger and Incentives for Quality Provision

Author

Listed:
  • Anthony Heyes

    (University of Ottawa)

  • Sandeep Kapur

    (Department of Economics, Mathematics & Statistics, Birkbeck)

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.

Suggested Citation

  • Anthony Heyes & Sandeep Kapur, 2012. "Customer Anger and Incentives for Quality Provision," Birkbeck Working Papers in Economics and Finance 1215, Birkbeck, Department of Economics, Mathematics & Statistics.
    • Handle: RePEc:bbk:bbkefp:1215
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    File URL: https://eprints.bbk.ac.uk/id/eprint/5944
    File Function: First version, 2012
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    References listed on IDEAS

    as
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    More about this item

    Keywords

    anger; customer attrition; quality;
    All these keywords.

    JEL classification:

    • D03 - Microeconomics - - General - - - Behavioral Microeconomics: Underlying Principles
    • D11 - Microeconomics - - Household Behavior - - - Consumer Economics: Theory
    • L15 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Information and Product Quality

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