Impact of Self-Service Technology in Designing a Service Delivery System
43 Pages Posted: 8 Oct 2020
Date Written: July 31, 2020
This paper considers a firm's decision on whether to employ a sales agent or install a self-service machine to serve customers. The customers' valuation on purchasing the product consists of the joint efforts of the service provider (the sales agent or the self-service machine) and the customer. To reflect the reality that the sales agent can quickly respond to heterogeneous customers, the sales agent and the customers are assumed to simultaneously determine their efforts with some service costs in the co-production process and the self-service machine's service effort is pre-determined by the firm before customer's visiting. The customers are heterogeneous in the service costs, which can be observed by the sales agent during the service interaction. The self-service machine's service cost is publicly known, and the sales agent's service cost is either publicly known or private information. By using a Cobb-Douglas (CD) function to model the co-production output, we establish the firm's decision model in designing the contract for the sales agents and the service effort provided by the self-service machine. We find that, under information symmetry, the firm should only provide one kind of services, i.e., contracting with the sales agent if the self-service machine's service cost is large and providing self-service machine otherwise. While under information asymmetry, it is possible for the firm to provide both services when the self-service machine's service cost is medium and the firm's service weight in generating service value is low. Moreover, when both services are provided, only the sales agent with low service cost will be contracted and the self-service machine can be used to eliminate the information rent, i.e., the sales agent is hurt. Numerical experiments are conducted to study how the firm's service weight and information asymmetry influence the firm's choices and its corresponding profits. It is interesting to find that the firm may benefit from information asymmetry when it can provide self-service machine.
Keywords: service delivery; coproduction system; contract design; self-service machine
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