Quality Provision When Customers Get Angry

33 Pages Posted: 7 Oct 2012 Last revised: 11 Oct 2012

See all articles by Anthony G. Heyes

Anthony G. Heyes

University of London, Royal Holloway College - Department of Economics

Sandeep Kapur

University of London - Birkbeck College; University of London - Economics, Mathematics and Statistics

Date Written: December 11, 2011

Abstract

There is overwhelming evidence that emotions are a significant determinant of consumer behavior. A customer may get angry if he feels that he is being treated unfairly by his supplier and that 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 the supplier's quality. Strategic interaction can allow for multiple equilibria including some in which no firm invests in high quality even when it is socially desirable. Allowing customers to voice their anger on review fora such as tripadvisor.com can eliminate low-quality equilibria, and may even support a unique equilibrium in which all firms choose high quality.

Keywords: anger, customer attrition, quality

JEL Classification: D03, D11

Suggested Citation

Heyes, Anthony and Kapur, Sandeep, Quality Provision When Customers Get Angry (December 11, 2011). Available at SSRN: https://ssrn.com/abstract=2158179 or http://dx.doi.org/10.2139/ssrn.2158179

Anthony Heyes

University of London, Royal Holloway College - Department of Economics ( email )

Royal Holloway College
Egham
Surrey, Surrey TW20 0EX
United Kingdom
44-(0)1784 44-3907 (Phone)
44-(0)1784 43-9534 (Fax)

Sandeep Kapur (Contact Author)

University of London - Birkbeck College ( email )

Malet Street
London, WC1E 7HX
United Kingdom

University of London - Economics, Mathematics and Statistics ( email )

7-15 Gresse Street
London, WC1E 7HX
United Kingdom
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+44 20 7631 6416 (Fax)

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