Exit, Tweets and Loyalty

Joshua S. Gans; Avi Goldfarb; Mara Lederman

doi:10.3386/w23046

Exit, Tweets and Loyalty

Joshua S. Gans, Avi Goldfarb & Mara Lederman

Working Paper 23046

DOI 10.3386/w23046

Issue Date January 2017

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.

We gratefully acknowledge financial support from SSHRC (grant # 493140). The paper benefited from helpful comments from Severin Borenstein, Judy Chevalier, Isaac Dinner, Francine Lafontaine, Dina Mayzlin, Amalia Miller and seminar participants at the University of Toronto, UC-Berkeley, the University of Minnesota, the University of North Carolina, Ebay, Facebook, the 2016 ASSA meetings, ZEW at Mannheim, the Searle Annual Antitrust Conference, the University of British Columbia, Harvard University, the NBER Summer Institute, the NBER Organizational Economics Working Group, Stanford University and Carnegie Mellon University. The views expressed herein are those of the authors and do not necessarily reflect the views of the National Bureau of Economic Research.
MARC RIS BibTeΧ

Exit, Tweets and Loyalty

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