Information and pricing effects in two-tier public service systems

Zhe George Zhang and Xiaoling Yin

International Journal of Production Economics, 2021, vol. 231, issue C

Abstract: Public services such as healthcare may be offered by both free and toll service providers. Such a system, called a two-tier service system, is usually subject to congestion and often modeled as two parallel queues. Customers can choose one of three options: joining the free system, joining the toll system, or balking based on the congestion level in each service system and the toll price. This study examines the joint effects of delay information and the price of the toll system on system performance. We consider the performance measures from three different perspectives: the customers, toll service providers, and social planners. Two information scenarios are studied. In the first scenario, called a mixed information case, the free system does not offer real-time queue length information, contrary to the toll system. In the second scenario, called a non-real-time information case, neither system offers real-time queue length information. Because the system dynamics are highly complex, we propose a computational approach to analyze system performance based on Markovian queueing models. Numerical illustrations are presented to generate important managerial insights for decision-makers An important finding is that there are interaction effects of disclosing delay information and pricing toll service on customer equilibrium strategies and major performance measures of the system. To reduce the expected waiting time, the queue length information should be hidden for lower toll price range and should be disclosed for higher price range. It is also found that the revenue maximization price is different from the socially optimal price.

Keywords: Public service; Queueing system; Waiting time; Social welfare; Information; Pricing; Two-tier system (search for similar items in EconPapers)
Date: 2021
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:proeco:v:231:y:2021:i:c:s0925527320302589

DOI: 10.1016/j.ijpe.2020.107897

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