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Price and speed decisions in customer-intensive services with two classes of customers

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  • Ni, Guanqun
  • Xu, Yinfeng
  • Dong, Yucheng

Abstract

In many customer-intensive services, the perceived quality of service decreases in the speed of service. Usually, an increase in service speed induces different marginal reductions in quality for heterogeneous customers. To bring insight into the managerial implications of this difference, we classify customers in terms of intensity parameters, and investigate the behavior of each class of customers in a queueing framework. The optimal service speed and price are derived to maximize service provider’s revenue. Our results demonstrate that no class is always attractive to the provider, and thus there are usually several combinations of service price and speed reaching the same maximal revenue. Moreover, under some mild conditions, the provider could gain more revenue by treating different classes with discrimination than by adopting uniform treatment.

Suggested Citation

  • Ni, Guanqun & Xu, Yinfeng & Dong, Yucheng, 2013. "Price and speed decisions in customer-intensive services with two classes of customers," European Journal of Operational Research, Elsevier, vol. 228(2), pages 427-436.
    • Handle: RePEc:eee:ejores:v:228:y:2013:i:2:p:427-436
    DOI: 10.1016/j.ejor.2013.01.053
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    Cited by:

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    2. Zhong, Yuanguang & Pan, Qi & Xie, Wei & Cheng, T.C.E. & Lin, Xiaogang, 2020. "Pricing and wage strategies for an on-demand service platform with heterogeneous congestion-sensitive customers," International Journal of Production Economics, Elsevier, vol. 230(C).
    3. Jalili Marand, Ata & Tang, Ou & Li, Hongyan, 2019. "Quandary of service logistics: Fast or reliable?," European Journal of Operational Research, Elsevier, vol. 275(3), pages 983-996.
    4. Kai Li & Yuqian Pan & Bayi Cheng & Bohai Liu, 2018. "The Setting and Optimization of Quick Queue," Journal of Optimization Theory and Applications, Springer, vol. 178(3), pages 1014-1026, September.
    5. Yu, Jianjun & Fang, Yanli & Zhong, Yuanguang & Zhang, Xiong & Zhang, Ruijie, 2022. "Pricing and quality strategies for an on-demand housekeeping platform with customer-intensive services," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 164(C).

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