Due to the common business practice emphasizing that “customer is our priority”, many companies are having a potential risk of dealing with lying customer and as a consequence, service recovery can be open to misuse by customers. Although opportunistic complaint is the major issue in hospitality industry which have negative impact on firms (Baker et al., 2012), most of the service failure and recovery literature focused on examining victim customers and their reaction to the service recovery, yet very little is known about how customers react to observing service failure made up by customers. To fill this gap in the literature, the purpose of this study is to examine the effects of observing service recovery aimed at opportunistic customers on customer behavioral reaction, namely, tipping behavior, revisit intention and intention to complain. A 2 (Service recovery aimed at other customer; good vs. bad) x 2 (Complaining behavior of other customers: legitimate vs. illegitimate) x 2 (Emotional expression: outrageous vs. calm) scenario-based between-subjects factorial experiment is utilized. This research provides evidence that observing opportunistic complaining behavior of other customers and the following service recovery aimed at other customers impact behavioral reaction of customers who witness that situation. This study broadens the service recovery literature by incorporating third party justice theory into dealing with illegitimate customer, which is not a case that the firm is responsible for the service recovery. In addition, the findings from this study addresses the benefit to the service industry by understanding the impact of observing other customers service recovery treatment on observers’ emotional reactions to the situation as well as subsequent behavioral intention.

• Kawon (Kathy) Kim(University of South Carolina, USA)
• Melissa Baker(University of Massachusetts Amherst, USA)