Queuing for Expert Services

Carnegie Mellon University Tepper School of Business Working Paper No. 2004-E-10

48 Pages Posted: 10 Dec 2004

See all articles by Laurens Debo

Laurens Debo

Dartmouth College - Tuck School of Business

L. Beril Toktay

Georgia Institute of Technology - Sustainability

Luk N. Van Wassenhove

INSEAD

Date Written: July 2004

Abstract

We consider a monopolist expert offering a service with a 'credence' characteristic. A credence service is one where the customer cannot verify, even after purchase, whether the amount of prescribed service was appropriate or not; examples include legal, medical or consultancy services and car repair. This creates an incentive for the expert to 'induce service', that is, to provide unnecessary services that add no value to the customer, but that allow the expert to increase his revenues. We focus on the impact of an operations phenomenon on service inducement - workload dynamics due to the stochasticity of interarrival and service times. To this end, we model the expert's service operation as a single-server queue. The expert determines the service price within a fixed- and variable-rate structure and decides whether to induce service or not. We characterize the expert's combined optimal pricing and service inducement strategy as a function of service capacity, potential market size, value of service and waiting cost. We conclude with design implications of our results in limiting service inducement.

Keywords: Queueing, credence goods

Suggested Citation

Debo, Laurens and Toktay, L. Beril and Van Wassenhove, Luk N., Queuing for Expert Services (July 2004). Carnegie Mellon University Tepper School of Business Working Paper No. 2004-E-10, Available at SSRN: https://ssrn.com/abstract=629322 or http://dx.doi.org/10.2139/ssrn.629322

Laurens Debo (Contact Author)

Dartmouth College - Tuck School of Business ( email )

Hanover, NH 03755
United States

L. Beril Toktay

Georgia Institute of Technology - Sustainability ( email )

800 West Peachtree St.
Atlanta, GA 30308
United States

Luk N. Van Wassenhove

INSEAD ( email )

Boulevard de Constance
77 305 Fontainebleau Cedex
France
(33) (0)1 60 72 42 66 (Phone)
(33) (0)1 60 72 40 49 (Fax)

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