Finance Papers

Document Type

Journal Article

Date of this Version

12-2016

Publication Source

Management Science

Volume

62

Issue

12

Start Page

3656

Last Page

3672

DOI

10.1287/mnsc.2015.2320

Abstract

In many service settings, customers have to join the queue without being fully aware of the parameters of the service provider (e.g., customers at checkout counters may not know the true service rate before joining). In such “blind queues,” customers make their joining/balking decisions based on limited information about the service provider’s operational parameters (from past service experiences, reviews, etc.) and queue lengths. We analyze a firm serving customers making decisions under arbitrary beliefs about the service parameters in an observable queue for a service with a known price. By proposing an ordering for the balking threshold distributions in the customer population, we are able to compare the effects of customer beliefs on the queue. We show that, although revealing the service information to customers improves revenues under certain conditions, it may destroy consumer welfare or social welfare. Given a market size, consumer welfare can be significantly reduced when a fast server announces its true service parameter. When revenue is higher under some beliefs, one would expect the congestion to also be higher because more customers join, but we show that congestion may not necessarily increase.

Copyright/Permission Statement

https://doi.org/10.1287/mnsc.2015.2320

Keywords

consumer decisions, lack of information, service revelation, consumer beliefs, queueing

Embargo Date

8-16-2016

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Date Posted: 27 November 2017