Service agents’ risk behavior and implications for co-creation

This paper aims to develop a conceptual framework for further understanding the risks embedded in co-creation services in high-contact service transactions. It delineates behavioral and economic perspectives focusing on agency costs, risk behavior, compensation structure and provides a context in which information is processed.

Following an extensive review of the literature, propositions are advanced that relate an agent’s risk behavior to information processing, compensation and the propensity to engage in co-creation. These propositions provide a complementary context for understanding risks in the co-creation process.

The propositions detail how a service agent’s information processing can be enhanced if the customer’s expected utility from transactions is maximized by managing the agent’s risk behavior and earnings potential. A compensation structure that balances fixed base and variable pay can motivate risk-taking and the agent’s propensity to engage in co-creation.

This paper extends the understanding of agency risks in the co-creation of hospitality services that integrates economic and behavioral perspectives with information processing. Theoretical implications include a broader context of the risks underlying co-creation. Practical implications relate to how earnings potential could be maximized by considering the agent’s risk behavior and the expected utility arising from such transactions.