Blind Queues: The Impact of Consumer Beliefs on Revenues and Congestion

30 Pages Posted: 6 Jan 2013 Last revised: 6 Aug 2015

See all articles by Shiliang Cui

Shiliang Cui

Georgetown University - McDonough School of Business

Senthil K. Veeraraghavan

University of Pennsylvania - The Wharton School - Operations, Information and Decisions

Date Written: April 1, 2015

Abstract

In many service settings, customers have to join the queue without being fully aware of the parameters of the service provider (for e.g., customers at check-out counters may not know the true service rate prior to joining). In such “blind queues”, customers make their joining/balking decisions based on the 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 known price.

We propose an ordering for the balking threshold distributions in customer population, which allows for comparing the effects of customer beliefs on the queue. We show that while revealing the service information to customers improves revenues under certain conditions, it may however destroy consumer welfare or social welfare. Given a market size, the 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 the congestion may not necessarily increase.

Keywords: Consumer Decisions, Lack of Information, Service Revelation, Consumer Beliefs, Queueing

JEL Classification: D60, D80, L10

Suggested Citation

Cui, Shiliang and Veeraraghavan, Senthil K., Blind Queues: The Impact of Consumer Beliefs on Revenues and Congestion (April 1, 2015). Available at SSRN: https://ssrn.com/abstract=2196817 or http://dx.doi.org/10.2139/ssrn.2196817

Shiliang Cui (Contact Author)

Georgetown University - McDonough School of Business ( email )

Washington, DC 20057
United States

Senthil K. Veeraraghavan

University of Pennsylvania - The Wharton School - Operations, Information and Decisions ( email )

Philadelphia, PA 19104
United States

HOME PAGE: http://https://oid.wharton.upenn.edu/profile/senthilv/

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