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Dynamic capacity adjustments with reactive customers

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  • van Ackere, Ann
  • Haxholdt, Christian
  • Larsen, Erik R.
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    Abstract

    In this paper we develop a behavioural model in which customers come and go based on their perception of waiting time (relative to other facilities) while managers gradually adjust the capacity of the facility based on their perception of demand. We explicitly account for the difference in access to information between existing and potential customers, which implies that the perception of potential customers lags the perception of current customers. We investigate the outcome of the interaction between these simultaneous dynamic decision processes, and in particular the impact of the lags created by the perception formation process and the time to implement desired changes in capacity. These multiple delays may result in customers and service provider being out of step: customers walk away just as the service provider manages to bring extra capacity online.

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    Bibliographic Info

    Article provided by Elsevier in its journal Omega.

    Volume (Year): 41 (2013)
    Issue (Month): 4 ()
    Pages: 689-705

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    Handle: RePEc:eee:jomega:v:41:y:2013:i:4:p:689-705

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    Related research

    Keywords: System dynamics; Behavioural queueing; Simulation; Capacity management;

    References

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    1. Berends, P. A. J. & Romme, A. G. L., 2001. "Cyclicality of capital-intensive industries: a system dynamics simulation study of the paper industry," Omega, Elsevier, vol. 29(6), pages 543-552, December.
    2. Sterman, John D., 1989. "Misperceptions of feedback in dynamic decision making," Organizational Behavior and Human Decision Processes, Elsevier, vol. 43(3), pages 301-335, June.
    3. Nie, Winter, 2000. "Waiting: integrating social and psychological perspectives in operations management," Omega, Elsevier, vol. 28(6), pages 611-629, December.
    4. van Ackere, Ann & Larsen, Erik R., 2004. "Self-organising behaviour in the presence of negative externalities: A conceptual model of commuter choice," European Journal of Operational Research, Elsevier, vol. 157(2), pages 501-513, September.
    5. Zhou, Rongrong & Soman, Dilip, 2003. " Looking Back: Exploring the Psychology of Queuing and the Effect of the Number of People Behind," Journal of Consumer Research, University of Chicago Press, vol. 29(4), pages 517-30, March.
    6. Ziv Carmon & J. George Shanthikumar & Tali F. Carmon, 1995. "A Psychological Perspective on Service Segmentation Models: The Significance of Accounting for Consumers' Perceptions of Waiting and Service," Management Science, INFORMS, vol. 41(11), pages 1806-1815, November.
    7. Rogelio Oliva & John D. Sterman, 2001. "Cutting Corners and Working Overtime: Quality Erosion in the Service Industry," Management Science, INFORMS, vol. 47(7), pages 894-914, July.
    8. Luo, Wenhong & J. Liberatore, Matthew & L. Nydick, Robert & B. Chung, Q & Sloane, Elliot, 2004. "Impact of process change on customer perception of waiting time: a field study," Omega, Elsevier, vol. 32(1), pages 77-83, February.
    9. Morecroft, John DW, 1983. "System dynamics: Portraying bounded rationality," Omega, Elsevier, vol. 11(2), pages 131-142.
    10. Larsen, Erik R. & Morecroft, John D. W. & Thomsen, Jesper S., 1999. "Complex behaviour in a production-distribution model," European Journal of Operational Research, Elsevier, vol. 119(1), pages 61-74, November.
    11. Christian Haxholdt & Erik R. Larsen & Ann van Ackere, 2003. "Mode Locking and Chaos in a Deterministic Queueing Model with Feedback," Management Science, INFORMS, vol. 49(6), pages 816-830, June.
    12. Noah Gans & Ger Koole & Avishai Mandelbaum, 2003. "Telephone Call Centers: Tutorial, Review, and Research Prospects," Manufacturing & Service Operations Management, INFORMS, vol. 5(2), pages 79-141, September.
    13. Piyush Kumar & Manohar U. Kalwani & Maqbool Dada, 1997. "The Impact of Waiting Time Guarantees on Customers' Waiting Experiences," Marketing Science, INFORMS, vol. 16(4), pages 295-314.
    14. Naor, P, 1969. "The Regulation of Queue Size by Levying Tolls," Econometrica, Econometric Society, vol. 37(1), pages 15-24, January.
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