Abeler, Johannes Calaki, Juljana Andree, Kai Basek, Christoph
Year of Publication:
CeDEx Discussion Paper Series 2009-12
After an unsatisfactory purchase, many firms are quick to apologize to customers. It is, however, not clear why they should do that. As the apology is costless, it should be regarded as cheap talk and thus ignored by the customer. In this paper, we test in a controlled field experiment whether apologizing in fluences customers' subsequent behavior. We find that apologizing yields much better outcomes for the firm than offering a monetary compensation.