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

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  • Liang, Pinghan

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.

Suggested Citation

  • Liang, Pinghan, 2013. "Exit and voice: a game-theoretic analysis of customer complaint management," MPRA Paper 45268, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:45268
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    Cited by:

    1. Anthony Dukes & Yi Zhu, 2019. "Why Customer Service Frustrates Consumers: Using a Tiered Organizational Structure to Exploit Hassle Costs," Marketing Science, INFORMS, vol. 38(3), pages 500-515, May.

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    More about this item

    Keywords

    Customer complaint management; Communication; Exit;
    All these keywords.

    JEL classification:

    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
    • L15 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Information and Product Quality
    • L51 - Industrial Organization - - Regulation and Industrial Policy - - - Economics of Regulation
    • M31 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Marketing and Advertising - - - Marketing

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