Operations, Information and Decisions Papers

Document Type

Journal Article

Date of this Version

1-2011

Publication Source

Management Science

Volume

57

Issue

1

Start Page

40

Last Page

56

DOI

10.1287/mnsc.1100.1250

Abstract

In many services, the quality or value provided by the service increases with the time the service provider spends with the customer. However, longer service times also result in longer waits for customers. We term such services, in which the interaction between quality and speed is critical, as customer-intensive services. In a queueing framework, we parameterize the degree of customer intensity of the service. The service speed chosen by the service provider affects the quality of the service through its customer intensity. Customers queue for the service based on service quality, delay costs, and price. We study how a service provider facing such customers makes the optimal “quality–speed trade-off.” Our results demonstrate that the customer intensity of the service is a critical driver of equilibrium price, service speed, demand, congestion in queues, and service provider revenues. Customer intensity leads to outcomes very different from those of traditional models of service rate competition. For instance, as the number of competing servers increases, the price increases, and the servers become slower.

Keywords

strategic customers, queueing games, service operations, cost disease

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Date Posted: 27 November 2017

This document has been peer reviewed.