Document Type

Article

Publication Date

2024

DOI

10.1002/mde.4441

Publication Title

Managerial and Decision Economics

Volume

Article in Press

Pages

1-15

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.

Rights

© 2024 The Authors

This is an open access article under the terms of the Creative Commons Attribution-NonCommercial NoDerivatives 4.0 International (CC BY-NC-ND 4.0) License, which permits use and distribution in any medium, provided the original work is properly cited, the use is non-commercial and no modifications or adaptations are made.

Comments

Data availability statement: Article states: "Data sharing is not applicable to this article as no datasets were generated or analyzed during this study."

ORCID

0000-0002-8686-8585 (Wu)

Original Publication Citation

Lu, A., Chen, F., & Wu, H. (2024). Service guarantee decision of Online Service Providers and market implications. Managerial and Decision Economics. Advance online publication. https://doi.org/10.1002/mde.4441

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