Market Structure, Quality and Consumer Behavior: Exit Voice and Loyalty Under Increasing Competition
Abstract: In this paper we propose a simple theoretical template that provides basic insights into the determinants of consumer decisions to complain, to switch, or to remain loyal to firms with whom they are dissatisfied. We show that, as a theoretical matter, the relationship between complaints and industry structure is ambiguous. We then utilize an extensive panel dataset to explore the empirical determinants of consumer complaining behavior in local exchange telephone service. The empirical results provide considerable support for the famous conjecture of Hirschman (1970) that complaints give way to switching as industries become more competitive.
