Journal
OPERATIONS RESEARCH LETTERS
Volume 39, Issue 5, Pages 390-396Publisher
ELSEVIER SCIENCE BV
DOI: 10.1016/j.orl.2011.06.011
Keywords
Competition; Contracts; Game theory; Services; Congestion
Categories
Funding
- National Science Foundation [CMMI-0620811, CNS-0644114, CCF-0832820]
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In service industries with congestion effects, two very different contractual structures are commonly observed, depending on whether or not firms choose to offer a guaranteed service level. We analyze the impact of these choices on market outcomes in oligopolistic industries. Our results highlight how different contractual agreements change the intensity of price competition in service industries. Broadly speaking, we show that competition is intensified when firms choose to offer service level guarantees. (C) 2011 Elsevier B.V. All rights reserved.
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