The Economics of Process Transparency

Abstract

We propose and analyze a novel framework to understand the role of non-instrumental information sharing in service operations management, i.e., information shared by the firm not to affect consumers’ actions, but to better manage their experience in the firm’s process. To this end, we model the interactions between a service provider (firm) and a consumer. The operations of the firm are organized as a process, consisting of a sequence of tasks, each of random duration. The firm shares real-time information with the consumer about the progress of their flow unit in the firm’s process via a process tracker. We analyze when providing such real-time progress information via process trackers help, or can possibly hurt, a delay-sensitive consumer. Our work draws upon the recent literature on belief-based/news utility in Economics. Our findings inform a service firm’s post-sales transparency strategy.

Keywords: Belief-Based Utility, Delay Disclosure, Process Analysis, Gain-Loss Utility, Information Design

JEL Classification: M11, M30, D81