{"title":"Service Guarantee Decision of Online Service Providers and Market Implications","authors":"Aijun Lu, Fuzan Chen, Harris Wu","doi":"10.1002/mde.4441","DOIUrl":null,"url":null,"abstract":"<p>Online services face quality uncertainties. To address user concerns, Online Service Providers (OSPs) sometimes provide service guarantees, compensating users if quality falls below a predefined threshold. This paper analyzes how OSPs use service guarantees to navigate market competition and enhance revenue through game theory and queuing theory models. Key findings include the following: offering guarantees enable OSPs to increase prices; in monopolistic markets, guarantees are offered only if the service guarantee strength is sufficient, whereas in competitive markets, decisions depend on relative strengths and competitor actions. Surprisingly, slower response times under service guarantees can boost profits, especially when resource costs are high.</p>","PeriodicalId":18186,"journal":{"name":"Managerial and Decision Economics","volume":"46 2","pages":"1405-1419"},"PeriodicalIF":2.5000,"publicationDate":"2024-12-11","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"https://onlinelibrary.wiley.com/doi/epdf/10.1002/mde.4441","citationCount":"0","resultStr":null,"platform":"Semanticscholar","paperid":null,"PeriodicalName":"Managerial and Decision Economics","FirstCategoryId":"96","ListUrlMain":"https://onlinelibrary.wiley.com/doi/10.1002/mde.4441","RegionNum":3,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":null,"EPubDate":"","PubModel":"","JCR":"Q2","JCRName":"ECONOMICS","Score":null,"Total":0}
引用次数: 0
Abstract
Online services face quality uncertainties. To address user concerns, Online Service Providers (OSPs) sometimes provide service guarantees, compensating users if quality falls below a predefined threshold. This paper analyzes how OSPs use service guarantees to navigate market competition and enhance revenue through game theory and queuing theory models. Key findings include the following: offering guarantees enable OSPs to increase prices; in monopolistic markets, guarantees are offered only if the service guarantee strength is sufficient, whereas in competitive markets, decisions depend on relative strengths and competitor actions. Surprisingly, slower response times under service guarantees can boost profits, especially when resource costs are high.
期刊介绍：
Managerial and Decision Economics will publish articles applying economic reasoning to managerial decision-making and management strategy.Management strategy concerns practical decisions that managers face about how to compete, how to succeed, and how to organize to achieve their goals. Economic thinking and analysis provides a critical foundation for strategic decision-making across a variety of dimensions. For example, economic insights may help in determining which activities to outsource and which to perfom internally. They can help unravel questions regarding what drives performance differences among firms and what allows these differences to persist. They can contribute to an appreciation of how industries, organizations, and capabilities evolve.
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