Exit, Tweets and Loyalty

NBER Working Paper No. 23046

Issued in January 2017

NBER Program(s):Industrial Organization, Productivity, Innovation, and Entrepreneurship



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.

Acknowledgments

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Document Object Identifier (DOI): 10.3386/w23046

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