Compensating citizens for poor service delivery: Experimental research in public and private settings

After a service failure, citizens expect a recovery strategy that restores perceived justice and places a reasonable value on their loss. Offering monetary compensation is a strategy commonly used in private settings, but less so in public settings. To date, compensation effects have not been researched in public settings. To investigate citizens' evaluations of perceived justice, negative emotions and post-recovery satisfaction we used a 2 (sector: public, private) by 2 (compensation promised: yes, no) by 2 (compensation offered: yes, no) factorial between-subjects experimental design (student sample), and replicated this in a second study (US citizens sample). Results showed that compensation leads to similar positive effects in public and private settings, confirming earlier private setting research that applied justice theory. Explicitly promising compensation prior to a service encounter had no effect. However, promising compensation and not offering it led to decreased citizens' evaluations, which confirms expectancy disconfirmation theory.