Resource title

Queuing for expert services (RV of 2004/46/TM)

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The authors 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. The authors 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, the authors 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. The authors 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. The authors conclude with design implications of their results in limiting service inducement.

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en

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application/pdf

Resource resource URL

http://flora.insead.edu/fichiersti_wp/inseadwp2004/2004-64.pdf

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Copyright INSEAD. All rights reserved