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Exit, Tweets, and Loyalty

Hirshman'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 shared\ of the flights in a market. We also find that airlines are more likely to respond to tweets from consumers in such markets.

Joshua S. Gans, University of Toronto
Avi Goldfarb, University of Toronto
Mara Lederman, University of Toronto
Publication Date: 
February, 2017
Publication Status: 
Document Number: 
File Description: 
First version, 2017