Optimal Strategy of Service Recovery for On-line Shops: Based on Infinitely Repeated Game

Service optimization in e-commerce is an important research field of service science. In which, service failures are unavoidable for on-line shops because of their particularities. Certain deals being applied to win the customers satisfactory when service failures happen can benefit on-line shops to be more competitive. In order to explore the optimal service recovery strategies of online shops, models of single-stage game, two-stage game and infinitely repeated game are used in this paper. Theoretical results show that service recovery is not the best choice for any online shops in one-term transaction, while the optimum compensation coefficient of these shops is proportional to the value of goods sold and the discount factor, and inversely proportional to their probability having no failures and their expected disutility to customers, in repeated transaction. These results are in good agreement with the real life.