Abstract

Based on social exchange theory, attribution theory and carryover effects, this study postulated that consumers' perceived price fairness in service failure situations is influenced by the main effect and interaction effect of three factors: the causes of service failure, the types of service failures, and the compensation for service failure. Two experiments were conducted to test the hypotheses. The significant findings are as follows: (1) Consumers who participated in the study of employee response to service delivery system failures perceived lower price fairness as compared to participants in the study of employee response to customer needs and requests or unprompted and unsolicited employee actions. (2) The interaction effect of controllability and stability on perceived price fairness for three types of service failures is mixed. (3) If the service failure is attributed to be “controllable” and “unstable” and consumers were later compensated for the service failure, those participants who encountered a failure situation where employees fail to respond to service delivery failures perceived higher price fairness than either of the following: those who encountered a service failure caused by employee response to customer needs and requests or those who encountered a service failure caused by unprompted and unsolicited employee actions.  

Keywords

service failure price compensation perceived price fairness