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Abstract This study examines customers’ reactions, including customer desire for revenge, revisit intention and social and emotional support, to service failure happening to adjacent customer and how the service recovery approach to this incident may mitigate these responses. It also examines psychological mechanisms (i.e. attribution of failure and jealousy) that may mediate the influence of these incidents on customers’ responses. Design/methodology/approach - Two studies were conducted to test the conceptual framework. They follow 2 x 2 between-subjects factorial experimental design using written scenarios. The scenarios described an observing customer witnessing a service failure (study one) and recovery (study two) happening to adjacent customer in a restaurant setting, 182 and 111 restaurant customers were randomly assigned to experimental conditions in study one and two respectively. Respondents were recruited from Amazon Mechanical Turk (Amazon Mturk) who are resident in USA. The data was collected by the means of online survey and analysed by the means of MANCOV A, Smart PLS and PROCESS-Hayes. Findings - Results supported that desire for revenge intention and revisit intention can be one of the reactions observing customer may resort to upon experiencing unfavorable service experience. Moreover, witnessing unfavorable service experience and/or bad service recovery that occurred to adjacent customer may also trigger desire for revenge intention and reduce the observing customer’s revisit intention. As for social and emotional support - as one of the observing customer’s reactions- it was only supported in case of witnessing unfavorable service experience aimed at adjacent customer. Jealousy was also supported for mediating the effect experiencing/witnessing service failure on customers’ responses (desire for revenge, revisit intention and social and emotional support). Practical implications -To manage the service experience and ensure customer satisfaction, restaurants need to account for how their approach to service recovery may affect other present customers in both positive and negative ways. In this sense, service recovery strategies may need to be considered in collective rather than individual manner even if these customers are not directly related to the service failure. Originality/value - This research examines the importance of the yet under-researched issue of indirect customer-to-customer interaction and how witnessing service failure/recovery occurred to adjacent-customer influence observing customer’s behavioral intentions. The service experience is not dyadic anymore, surrounding environment is of a great importance |