This article has been reviewed according to Science X's editorial process and policies. Editors have highlighted the following attributes while ensuring the content's credibility: From coffee shops to customer service call centers, most people believe they have a good sense of how long a service will take. But new research from the University of Florida Warrington College of Business shows that customers often underestimate how much service times can vary, a behavioral bias with important implications for service systems and customers alike.
The findings are published in the journal Manufacturing & Service Operations Management. The study finds that being overly certain about how predictable service times are, a bias known as overprecision, can affect whether people decide to join a line or pay for a service. In turn, it affects how businesses should price services and communicate wait times.
"Our study shows how the common cognitive bias of overconfidence, in which decision-makers tend to make overly optimistic forecasts about uncertain events, can shape individual decisions and entire service systems," explained Na Zhang, Ph.D., a UF Warrington graduate and assistant professor at Wichita State University. For businesses, this misconception can create an opportunity to charge higher prices. When customers are waiting but can't see how long the line is, the optimal price businesses can charge is higher than traditional models suggest.
In these "unobservable" settings, the gap between what maximizes company revenue and what would benefit customers is stark, with consumer benefit consistently negative. The study also finds that, in these settings, the price that maximizes business revenue is higher than the price that would maximize overall benefit. When customers can see how long the line is, however, a manager should be cautious about pricing: The optimal price can be higher or lower than classical theory suggests.
In these "observable" settings, consumers can receive a positive or negative benefit, depending on how congested the system is. The research also finds that businesses can improve revenue by sharing how long a line is during very busy or very slow periods. When a business is moderately busy, though, the benefits of providing queue-length information are less clear and require more thoughtful decision-making by managers.
"In these cases, companies may need to be more strategic about when they share wait-time and queue-length information," explained Anand Paul, Ph.D., E.R. Bell Professor at the UF Warrington College of Business. For consumers, having more information isn't always better, the research notes.
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