Optimal price-speed strategy in customer-intensive service system
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C93

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    Abstract:

    This paper studies the optimal " price-speed" strategy in customer-intensive service systems which are represented by medical care,personal care and consultation industries. In the traditional service systems, customers will be more satisfied when the service speed increases. By contrast,in customer-intensive service systems,a higher service speed will make customers feel less satisfied. Thus,firms in customer-intensive service industries face the dilemma between service speed and service quality. In this paper,first,a monopoly firm’s optimal price-speed strategy is analyzed,and then the firms’optimal price-speed strategies are considered in a competitive environment. Results show that competition would not necessarily lead to lower service prices. Specifically,when the market size is in the middle range,competition can induce a higher service price. Meanwhile,market competition will drive down the service speed but increase social welfare. In addition,the impacts of service time sensitivity on the firm’s optimal service price and service speed are different when market size varies. Some counter-intuitive conclusions are helpful to guide the practices of firms in customer-intensive service system.

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  • Online: October 25,2021
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