Working Paper: NBER ID: w23046
Authors: Joshua S. Gans; Avi Goldfarb; Mara Lederman
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.
Keywords: Consumer Voice; Market Structure; Airlines; Twitter; Quality Deterioration
JEL Codes: L13; L14; L93
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Competition decreases (L13) | Likelihood of voice being exercised (D72) |
| Market dominance (L11) | Volume of tweets (C58) |
| Airline's quality (on-time performance) (L93) | Volume of tweets (C58) |
| Market dominance (L11) | Responsiveness to consumer voice (D18) |
| Quality deterioration (L15) | Volume of tweets (C58) |