An Empirical Study of Customer Spillover Learning About Service Quality

38 Pages Posted: 21 Jul 2016 Last revised: 15 Aug 2017

See all articles by Andres Musalem

Andres Musalem

Universidad de Chile

Yan Shang

Facebook Inc

Jing-Sheng Jeannette Song

Duke University - Fuqua School of Business

Date Written: August 11, 2017

Abstract

"Spillover" learning is defined as customers' learning about the quality of a service (or product) from their previous experiences with similar yet not identical services. In this paper, we propose a novel, parsimonious and general Bayesian hierarchical learning framework for estimating customers' spillover learning. We apply our model to a one-year shipping/sales historical data provided by a world-leading third party logistics company and study how customers' experiences from shipping on a particular route affect their future decisions about shipping not only on that route, but also on other routes serviced by the same logistics company. Our empirical results are consistent with information spillovers driving customer choices. Customers also display an asymmetric response such that they are more sensitive to delays than early deliveries. In addition, we find that customers are risk averse being more sensitive to their uncertainty about the mean service quality than to the intrinsic variability of the service. Finally, we develop policy simulation studies to show the importance of accounting for customer learning when a firm considers service quality improvement decisions.

Keywords: service operations management, customer learning, Bayesian hierarchical models, structural estimation, air cargo logistics

Suggested Citation

Musalem, Andres and Shang, Yan and Song, Jing-Sheng Jeannette, An Empirical Study of Customer Spillover Learning About Service Quality (August 11, 2017). Available at SSRN: https://ssrn.com/abstract=2811774 or http://dx.doi.org/10.2139/ssrn.2811774

Andres Musalem

Universidad de Chile ( email )

Beauchef 851
Santiago
Chile

HOME PAGE: http://www.dii.uchile.cl/~amusalem

Yan Shang (Contact Author)

Facebook Inc ( email )

Menlo Park, CA 94025
United States

Jing-Sheng Jeannette Song

Duke University - Fuqua School of Business ( email )

100 Fuqua Drive
Duke University
Durham, NC 27708
United States

HOME PAGE: http://people.duke.edu/~jssong/

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