To Punish or to Forgive: Examining the Effects of Monetary Penalties on Consumers’ Perceptions and Behavioral Intentions

Monetary penalties are imposed on consumers in various industries, particularly services. For example, retailers typically charge a restocking fee when consumers return unwanted products and banks usually charge a late payment fee when consumers fail to pay their credit card bills on time. Research showed that there is a prevalent feeling among consumers that these penalties are unfair, leading consumers to develop negative emotions and vengeful feelings toward the provider as well as negative behavioral consequences such as switching service providers and negative word-of-mouth (Fram and Callahan 2001, Kim and Smith 2005).