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Psychological Heterogeneity in a Queue: The Impact of Loss Aversion on Service Pricing

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Abstract

The authors consider an M/M/1 queue with two types of customers, where customers are classified into two categories according to their psychological feelings when facing uncertainty about queue information. In the unobservable queue, experienced customers could accurately calculate their expected utilities, while first-time customers are loss-averse and the psychological feelings could incur additional gain-loss utilities. By defining customers’ willingness to pay, the authors derive the equilibrium joining-balking behaviors for each type of customer and obtain the service provider’s optimal pricing decision. The authors also classify the implications of the obtained results.

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Authors and Affiliations

  1. College of Economics and Management, Shandong University of Science and Technology, Qingdao, 266590, China

    Tao Jiang & Li Gao

  2. School of Mathematics-Physics and Finance, Anhui Polytechnic University, Wuhu, 241000, China

    Xudong Chai

  3. College of Science, Nanjing University of Posts and Telecommunications, Nanjing, 210023, China

    Qihui Bu

Authors
  1. Tao Jiang
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  2. Li Gao
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  3. Xudong Chai
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  4. Qihui Bu
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Corresponding author

Correspondence to Tao Jiang.

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The authors declare no conflict of interest.

Additional information

This research was supported by the National Natural Science Foundation of China under Grant No. 12001329, Shandong Provincial Natural Science Foundation under Grant No. ZR2019BG014, Scientific Research Foundation of Anhui Polytechnic University under Grant No. 2022YQQ026, Scientific Research Foundation of Shandong University of Science and Technology for Recruited Talents under Grant No. 2019RCJJ016.

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Jiang, T., Gao, L., Chai, X. et al. Psychological Heterogeneity in a Queue: The Impact of Loss Aversion on Service Pricing. J Syst Sci Complex 36, 2536–2558 (2023). https://doi.org/10.1007/s11424-023-2117-9

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  • DOI: https://doi.org/10.1007/s11424-023-2117-9

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