Managing Customer Expectations and Priorities in Service Systems

55 Pages Posted: 30 Aug 2015

See all articles by Qiuping Yu

Qiuping Yu

Scheller College of Business, Georgia Institute of Technology

Gad Allon

University of Pennsylvania - The Wharton School

Achal Bassamboo

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

Seyed Iravani

Northwestern University - Department of Industrial Engineering and Management Sciences

Date Written: August 1, 2015

Abstract

We study how to use delay announcements to manage customer expectations while allowing the firm to prioritize among customers with different sensitivities to time and value. We examine this problem by developing a framework which characterizes the strategic interaction between the firm and heterogeneous customers. When the firm has information about the state of the system, yet lacks information on customer types, delay announcements play a dual role: they inform customers about the state of the system, while they also have the potential to elicit information on customer types based on their response to the announcements. The tension between these two goals has implications to the type of information that can be shared credibly. To explore the value of the information on customer types, we also study a model where the firm can observe customer types. We show that having information on the customer type may improve or hurt the credibility of the firm. While the creation of credibility increases the firm's profit, the loss of credibility does not necessarily hurt its profit.

Keywords: delay announcements; heterogenous customers; priority queue; information asymmetry; cheap talk

Suggested Citation

Yu, Qiuping and Allon, Gad and Bassamboo, Achal and Iravani, Seyed, Managing Customer Expectations and Priorities in Service Systems (August 1, 2015). Available at SSRN: https://ssrn.com/abstract=2652351 or http://dx.doi.org/10.2139/ssrn.2652351

Qiuping Yu (Contact Author)

Scheller College of Business, Georgia Institute of Technology ( email )

800 West Peachtree NW
Atlanta, GA 30308
United States

HOME PAGE: http://https://qiupingyu.com/

Gad Allon

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

Seyed Iravani

Northwestern University - Department of Industrial Engineering and Management Sciences ( email )

Evanston, IL 60208-3119
United States

Here is the Coronavirus
related research on SSRN

Paper statistics

Downloads
80
Abstract Views
579
rank
335,305
PlumX Metrics