Competition and Contracting in Service Industries
Operations Research Letters, Vol. 39, pp. 390-396, 2011
7 Pages Posted: 9 Nov 2011
Date Written: May 17, 2011
In service industries with congestion effects, two very different contractual structures are commonly observed, depending on whether or not firms choose to offer a guaranteed service level. We analyze the impact of these choices on market outcomes in oligopolistic industries. Our results highlight how different contractual agreements change the intensity of price competition in service industries. Broadly speaking, we show that competition is intensified when firms choose to offer service level guarantees.
Suggested Citation: Suggested Citation