Quality-Speed Conundrum: Trade-offs in Customer-Intensive Services

Krishnan S. Anand (), M. Faz{\i}l Paç () and Senthil Veeraraghavan ()
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Krishnan S. Anand: David Eccles School of Business, University of Utah, Salt Lake City, Utah 84112
M. Faz{\i}l Paç: The Wharton School, University of Pennsylvania, Philadelphia, Pennsylvania 19104
Senthil Veeraraghavan: The Wharton School, University of Pennsylvania, Philadelphia, Pennsylvania 19104

Management Science, 2011, vol. 57, issue 1, 40-56

Abstract: In many services, the quality or value provided by the service increases with the time the service provider spends with the customer. However, longer service times also result in longer waits for customers. We term such services, in which the interaction between quality and speed is critical, as customer-intensive services. In a queueing framework, we parameterize the degree of customer intensity of the service. The service speed chosen by the service provider affects the quality of the service through its customer intensity. Customers queue for the service based on service quality, delay costs, and price. We study how a service provider facing such customers makes the optimal "quality-speed trade-off." Our results demonstrate that the customer intensity of the service is a critical driver of equilibrium price, service speed, demand, congestion in queues, and service provider revenues. Customer intensity leads to outcomes very different from those of traditional models of service rate competition. For instance, as the number of competing servers increases, the price increases, and the servers become slower. This paper was accepted by Sampath Rajagopalan, operations and supply chain management.

Keywords: strategic customers; queueing games; service operations; cost disease (search for similar items in EconPapers)
Date: 2011
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (58)

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