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.
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
Repository Citation
Lu, Aijun; Chen, Fuzan; and Wu, Harris, "Service Guarantee Decision of Online Service Providers and Market Implications" (2024). Information Technology & Decision Sciences Faculty Publications. 106.
https://digitalcommons.odu.edu/itds_facpubs/106
Supporting Information
Included in
Business Administration, Management, and Operations Commons, E-Commerce Commons, Economics Commons
Comments
Data availability statement: Article states: "Data sharing is not applicable to this article as no datasets were generated or analyzed during this study."