Wednesday, February 22, 2017

Exit, Tweets, and Loyalty

Joshua S. Gans, University of Toronto - Rotman School of Management; NBER, Avi Goldfarb, University of Toronto - Rotman School of Management, and Mara Lederman, University of Toronto - Rotman School of Management have a fascinating paper on Exit, Tweets, and Loyalty.

ABSTRACT: Hirschman’s Exit, Voice, and Loyalty highlights the role of “voice” in disciplining firms for low quality. We develop a formal model of voice as a relational contact between firms and consumers and show that voice is more likely to emerge in concentrated markets. We test this model using data on tweets to major U.S. airlines. We find that tweet volume increases when quality – measured by on-time performance – deteriorates, especially when the airline operates a large share of the flights in a market. We also find that airlines are more likely to respond to tweets from consumers in such markets.

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