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A Study of Service Pricing with Unfairness Averse Customers

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  • 1. School of Economics and Management, Nanjing University of Science and Technology, Nanjing 210094, China;
    2. School of Economics and Management, Nanjing University of Aeronautics and Astronautics, Nanjing 211106, China

Received date: 2016-05-31

  Revised date: 2016-12-22

  Online published: 2018-04-20

Abstract

Pricing and Queuing Mechanism Design is critical to enterprise operations.The enterprises often adopt classification of services through setting priority due to the different waiting cost of customer. While, the regular customers will get unfairness aversion psychology because their waiting time is longer (W2>W1) than the waiting time of priority customers. The innovation of this paper is that the above unfairness aversion psychology is conidered that caused by comparison will bring negative service utility α(W2-W1) for regular customers and change their service utility, which caues the flow of customers (customers select the regular service or priority service based on their total service utility) and influencing the enterprise revenue and social cost. In this paper, the relations between customer unfairness aversion psychology(use unfairness aversion parameter α to denote) and enterprise revenue and social cost are studied,respectively.On the basis, whether the monopolistic service enterprises should adopt priority services and the service pricing is discussed. By optimizing the objective functions and analyzing the relationship between the unfairness aversion parameter and the optimized results, following conclusions are drawn.From the perspective of enterprise revenue maximizing or social cost minimizing, enterprises should adopt the classification of services and charge priority service fee when unfairness aversion psychology is weaker. When unfairness aversion psychology is stronger, from the perspective of enterprise revenue maximizing, to retain only priority customers and charge priority service fee is optimal. From the perspective of social cost minimizing, the enterprises should cancel the classification of services, retain only regular customers and charge no priority service fee. Enterprise managers can consider the above management insights as a reference and choose the optimal service mechanism and pricing strategy with the change of customer unfairness aversion psychology.

Cite this article

LIU Jian, ZHAO Hong-kuan, LIU Si-feng . A Study of Service Pricing with Unfairness Averse Customers[J]. Chinese Journal of Management Science, 2018 , 26(2) : 46 -53 . DOI: 10.16381/j.cnki.issn1003-207x.2018.02.005

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