Hide or Advertise: The Carrier's Choice of Waiting Time Information Strategies

33 Pages Posted: 6 Dec 2018

See all articles by Achim Czerny

Achim Czerny

Hong Kong Polytechnic University - Faculty of Business

Pengfei Guo

Hong Kong Polytechnic University

Refael Hassin

Tel Aviv University - Department of Statistics and Operations Research

Date Written: November 11, 2018

Abstract

This paper considers a monopoly firm (carrier) that charges a uniform price to passengers. Passengers are delay-sensitive and hence demand rates depend on waiting times. The carrier can choose to reveal or hide waiting time information. We show that optimal information strategies depend on the curvature of the demand rate functions for both profit- and welfare-maximizing carriers. When demand rates are concave functions of waiting times, the profit-maximizing strategy is hiding waiting time information; and when demand rates are convex functions of waiting times, revealing waiting time maximizes profit. The carrier's welfare-maximizing information strategy is hiding waiting time when demand rate functions are strictly and sufficiently concave. Headway choices, which determine the lengths of inter-departure times, are also considered. We show that the profit-maximizing headways are longer than the welfare-maximizing headways when prices are given. Numerical studies are used to illustrate the dependence of headway choices on information strategies and demand rate curvatures.

Keywords: Information, demand rates, curvatures, headways, prices

JEL Classification: D42, D89, L12, L90, R40

Suggested Citation

Czerny, Achim and Guo, Pengfei and Hassin, Refael, Hide or Advertise: The Carrier's Choice of Waiting Time Information Strategies (November 11, 2018). Available at SSRN: https://ssrn.com/abstract=3282276 or http://dx.doi.org/10.2139/ssrn.3282276

Achim Czerny (Contact Author)

Hong Kong Polytechnic University - Faculty of Business ( email )

9/F, Li Ka Shing Tower
The Hong Kong Polytechnic University
Hong Kong, Hung Hom, Kowloon M923
China

Pengfei Guo

Hong Kong Polytechnic University ( email )

11 Yuk Choi Rd
Hung Hom
Hong Kong

Refael Hassin

Tel Aviv University - Department of Statistics and Operations Research ( email )

Tel Aviv 69978
Israel

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