Strategic Announcement and Interpretation of Information in Service System

Gad Allon
Kellogg School of Managementt
Northwestern University


Wednesday, October 31, 2007
4:30 - 5:30 PM
Terman Engineering Center, Room 453


Abstract:

Delay announcements informing customers about anticipated service delays are prevalent in service-oriented systems. Which delay announcements a service provider should use is a complex problem, and its answer depends on both the dynamics of the underlying queueing system and the customer behavior.

We address this problem by proposing and studying a model in which customers treat information provided by the service provider as unverified and non-binding. The model thus treats customers as strategic in the way they process information, and the service provider as strategic in the way she provides the information.

This allows us to characterize the equilibrium language that emerges between the service provider and her customers. By doing that, not only do we relax the common assumption in the operations literature that customers are naive in their treatment of the announcements, but we also demonstrate that many of the commonly used announcements arise in equilibrium in such a model. The spectrum of possible equilibria ranges from announcements that are analogous to the verbal type, describing the volume of arriving customers as high or low to the detailed waiting time announcements, both common in different systems. While prior work analyzed systems with either full information or no information, the model we develop shows that a richer language, ranging from verbal abstract statements to intentional vagueness, arises as an equilibrium outcome in a game played between the service provider and her customers. In developing the model and characterizing the emerging equilibrium language, we will account both for the strategic nature of the interested parties – customers and service provider -- as well as the queueing dynamics prevalent to service systems.

(Joint work with Achal Bassamboo and Itay Gurvich)







Operations Research Colloquia: http://or.stanford.edu/oras_seminars.html