The Role of Service Quality and Expectations in Explaining Customer Complaints

Customer complaints are related to the experienced quality of a product or service. If product quality is unobservable ex ante, customer complaints may be driven by expectations as well as by the actually experienced quality. I test different hypotheses about the effects of actual quality and of expected quality on customer complaints in the U.S. airline industry. I find that there are fewer complaints when the actual quality of service is higher. In addition, higher expected quality leads to more complaints especially when the quality is worse than expected. The results imply that complaints are largely explained by disappointed expectations. JEL code: L15, L93, M31 ∗I would like to thank Nancy Rose and Glenn Ellison for their advice, Richard Schmalensee and participants at the 2003 Berkeley-Stanford IO Fest for helpful comments, and the Alfred P. Sloan Foundation for financial support through the MIT Global Airline Industry Program.