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Quality-Speed Competition in Customer-Intensive Services with Boundedly Rational Customers
Li,Xin1; Guo,Pengfei2; Lian,Zhaotong3
2016-11-01
Source PublicationProduction and Operations Management
ISSN1059-1478
Volume25Issue:11Pages:1885-1901
Abstract

We consider a system in which two competing servers provide customer-intensive services and the service reward is affected by the length of service time. The customers are boundedly rational and choose their service providers according to a logit model. We demonstrate that the service provider revenue function is unimodal in the service rate, its decision variable, and show that the service rate competition has a unique and stable equilibrium. We then study the price decision under three scenarios with the price determined by a revenue-maximizing firm, a welfare-maximizing social planner, or two servers in competition. We find that the socially optimal price, subject to the requirement that the customer actual utility must be non-negative, is always lower than the competition equilibrium price which, in turn, is lower than the revenue-maximizing monopoly price. However, if the customer actual utility is allowed to be negative in social optimization, the socially optimal price can be higher than the other two prices in a large market.

KeywordBounded Rationality Customer-intensive Service Queueing Strategy Speed-quality Competition
DOIhttp://doi.org/10.1111/poms.12583
URLView the original
Indexed BySCI ; SSCI
Language英语
WOS Research AreaEngineering ; Operations Research & Management Science
WOS SubjectEngineering, Manufacturing ; Operations Research & Management Science
WOS IDWOS:000387757600006
PublisherWILEY-BLACKWELL, 111 RIVER ST, HOBOKEN 07030-5774, NJ USA
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Citation statistics
Cited Times [WOS]:16   [WOS Record]     [Related Records in WOS]
Document TypeJournal article
CollectionFaculty of Business Administration
DEPARTMENT OF ACCOUNTING AND INFORMATION MANAGEMENT
Affiliation1.Department of Decision Sciences,School of Business,Macau University of Science and Technology,,Taipa,Macao
2.Department of Logistics and Maritime Studies,The Hong Kong Polytechnic University,,Hong Kong,Hong Kong
3.Faculty of Business Administration,E22,University of Macau,,Taipa,Macao
Recommended Citation
GB/T 7714
Li,Xin,Guo,Pengfei,Lian,Zhaotong. Quality-Speed Competition in Customer-Intensive Services with Boundedly Rational Customers[J]. Production and Operations Management,2016,25(11):1885-1901.
APA Li,Xin,Guo,Pengfei,&Lian,Zhaotong.(2016).Quality-Speed Competition in Customer-Intensive Services with Boundedly Rational Customers.Production and Operations Management,25(11),1885-1901.
MLA Li,Xin,et al."Quality-Speed Competition in Customer-Intensive Services with Boundedly Rational Customers".Production and Operations Management 25.11(2016):1885-1901.
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