The marketing and consumer behavior literature has traditionally suggested that customer satisfaction is a relative concept, and is always judged in relation to a standard (Olander, 1977). Consequently, in the course of its development, a number of different competing theories based on various standards have been postulated for explaining customer satisfaction. 

The theories include the Expectancy-Disconfirmation Paradigm (EDP), the Value-Precept Theory, the Attribution Theory, the Equity Theory, the Comparison Level Theory, the Evaluation Congruity Theory, the Person-Situation-Fit model, the Performance Importance model, the Dissonance, and the Contrast Theory

The Dissonance Theory.

The Dissonance Theory suggests that a person who expected a high-value product and received a low-value product would recognize the disparity and experience a cognitive dissonance (Cardozzo, 1965). That is, the disconfirmed expectations create a state of dissonance or a psychological discomfort (Yi, 1990). According to this theory, the existence of dissonance produces pressures for its reduction, which could be achieved by adjusting the perceived disparity. This theory holds that "post exposure ratings are primarily a function of the expectation level because the task of recognizing disconfirmation is believed to be psychologically uncomfortable. Thus consumers are posited to perceptually distort expectation-discrepant performance so as to coincide with their prior expectation level"(Oliver, 1977, p. 480).

The Contrast Theory 

The Contrast Theory suggests the opposite of the Dissonance Theory. According to this theory, when actual product performance falls short of consumer’s expectations about the product, the contrast between the expectation and outcome will cause the consumer to exaggerate the disparity (Yi, 1990). The Contrast theory maintains that a customer who receives a product less valuable than expected, will magnify the difference between the product received and the product expected (Cardozzo, 1965). This theory predicts that product performance below expectations will be rated poorer than it is in reality (Oliver & DeSarbo, 1988). In other words, the Contrast Theory would assume that "outcomes deviating from expectations will cause the subject to favorably or unfavorably react to the disconfirmation experience in that a negative disconfirmation is believed to result in a poor product evaluation, whereas positive disconfirmation should cause the product to be highly appraised" (Oliver, 1977, p. 81). In terms of the above restaurant situation, the consumer might say that the restaurant was one of the worst he or she had ever been and the food was unfit for human consumption, etc.

The Expectancy Disconfirmation Paradigm

The Expectancy Disconfirmation Paradigm Drawing on the shortcomings of the above early theories of consumer satisfaction, Oliver (1977; 1980) proposed the Expectancy-Disconfirmation Paradigm (EDP) as the most promising theoretical framework for the assessment of customer satisfaction. The model implies that consumers purchase goods and services with pre-purchase expectations about the anticipated performance. The expectation level then becomes a standard against which the product is judged. That is, once the product or service has been used, outcomes are compared against expectations. If the outcome matches the expectation confirmation occurs. Disconfirmation occurs where there is a difference between expectations and outcomes. A customer is either satisfied or dissatisfied as a result of positive or negative difference between expectations and perceptions. Thus, when service performance is better than what the customer had initially expected, there is a positive disconfirmation between expectations and performance which results in satisfaction, while when service performance is as expected, there is a confirmation between expectations and perceptions which results in satisfaction. In contrast, when service performance is not as good as what the customer expected, there is a negative disconfirmation between expectations and perceptions which causes dissatisfaction.