Study of multi-stage signaling game modeling in customer relation management (CRM)

To resolve the problem of moral hazard and adverse selection that may arise from asymmetric information between a business and customer, and to offer decision-support for business and customers, signaling game theory is applied into the customer relation management. An extended model of single-direction multi-stage signaling game between business and customer, and a mathematical model of bi-direction multi-stage signaling game between businesses and customers were established. Furthermore, methods of goal analysis and backwards induction were used to obtain the separating equilibriums of the above two models. The equilibrium signal selections of business and customer during the transaction are obtained. Research results showed business and customer of different types will take different equilibrium signals, which offers a basis to judge their true types.