Information heterogeneity in queueing service systems: Differentiated pricing decision with word-of-mouth rating information on service value

Abstract

<p style='text-indent:20px;'>In many service settings, customers are usually unaware of service-related information. Therefore, in such service systems, customers can only resort to online ratings posted on the review platforms to obtain the user-generated service information and make their joining/balking decisions depending on their service value assessment (consumption utility). Motivated by such phenomenon, we consider a single-server M/G/1 queue with two types of customers with heterogeneous access to service-related information, namely experienced and first-time customers, and price them differently. We first characterize the equilibrium behavior of experienced customers and investigate how the market size of first-time customers and the number of ratings collected by first-time customers affect the queueing behavior of experienced customers. We then construct the revenue function and obtain the differentiated pricing strategy of the service provider. Interestingly, through numerical examples, we show that when the service price for experienced customers is fixed, the impact of the number of ratings collected by first-time customers on optimal revenue and pricing is related to the variance of service value. When the service price for first-time customers is fixed, the effect of number of ratings collected by first-time customers on optimal revenue and pricing is related to the mean service value (real service value). In a word, compared to the full rationality setting, the bounded rationality setting of first-time customers who have imperfect knowledge of the real service value could bring different effects on the strategic behavior of customers and the pricing decision of the service provider.</p>