'We Will Be Right with You': Managing Customers with Vague Promises

42 Pages Posted: 20 Oct 2008

Date Written: October 19, 2008

Abstract

Delay announcements informing customers about anticipated service delays are prevalent in service-oriented systems. Which delay announcements a service provider should use is a complex question, and its answer depends on both the dynamics of the underlying queuing system and on the customer behavior. We examine this problem of information communication by considering a model in which both the firm and the customers act strategically: the firm in choosing its delay announcement, and the customers in interpreting these announcements and in making the decision about when to join the system and when to balk. We characterize the equilibrium language that emerges between the service provider and her customers. The analysis of the emerging equilibrium provides new and interesting insights into customer-firm information sharing. We show that even though the information provided to customers is non-verifiable and non-credible, it improves the profits of the firm and the expected utility of the customers. Further, the information could be as simple as "High Congestion"/"Low Congestion" announcements, or could be as detailed as the true state of the system. We also show that firms may choose to shade some of the truth by using intentional vagueness to lure customers.

Suggested Citation

Allon, Gad and Bassamboo, Achal and Gurvich, Itai, 'We Will Be Right with You': Managing Customers with Vague Promises (October 19, 2008). Available at SSRN: https://ssrn.com/abstract=1286865 or http://dx.doi.org/10.2139/ssrn.1286865

Gad Allon (Contact Author)

University of Pennsylvania - The Wharton School ( email )

3641 Locust Walk
Philadelphia, PA 19104-6365
United States

Achal Bassamboo

Northwestern University - Department of Managerial Economics and Decision Sciences (MEDS) ( email )

2001 Sheridan Road
Evanston, IL 60208
United States

Itai Gurvich

Northwestern University ( email )

2001 Sheridan Road
Evanston, IL 60208
United States

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