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The present paper examines the effectiveness of financial overcompensation as a means to enhance customer loyalty after a product failure. Overcompensation implies that customers are entitled to a refund that is larger than the purchase price. It is, however, still unclear whether large overcompensations entail saturation effects, or alternatively, result in an actual drop in customer loyalty. We predicted that the overcompensation-loyalty relationship is generally characterized by an inverted U-shaped function. In line with this prediction, the results of four studies showed that mild overcompensations had, on average, a positive effect on customer loyalty beyond equal compensation, but only up to compensation levels of approximately 150% of the purchase price of faulty products. Beyond this level, the effectiveness of overcompensation diminished, eventually leading to a general drop in customer loyalty. Despite this overall pattern, two studies revealed robust individual differences in how customers react to increasing overcompensation. A majority of customers increased their loyalty when the overcompensation enlarged, but the curve flattened out in the high range. However, there was also a smaller portion of customers who reacted negatively to every form of overcompensation. A practical implication of these findings, therefore, is that companies should not offer compensations that are greater than 150% of the initial price, as these do not contribute to greater loyalty in any category of customers.
Surprisingly little research has investigated the particular motives that underlie choice behavior in social dilemma situations. The main aim of the present research was to ask whether behavior in take-some games (such as the multiple-person Commons Dilemma Game and the two-person Bandit Game) and give-some games (such as the multiple-person Public Goods Dilemma Game and the two-person Dictator Game) is differently affected by proself and prosocial motives. Two experimental studies were conducted. Our first experiment used a trait-based assessment of the motives, whereas in our second experiment the motives were measured as state variables. The results of both experiments revealed that proself and prosocial motives did not explain much difference between taking and giving when comparing the Commons Dilemma Game and the Public Goods Dilemma Game. Yet, our second experiment revealed that these motives did differentiate choices in the Bandit Game and the Dictator Game. More specifically, prosocial motives are more strongly related to giving behavior in the Dictator Game than to taking behavior in the Bandit Game. As such, it can be concluded that in dyadic games (but not in multiple-person games) prosocial motives (but not proself motives) predict choice behavior in a game-specific way.
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