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—Should Captive Sardines Be Compensated? Serving Customers in a Confined Zone

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  • Rachel R. Chen

    (Graduate School of Management, University of California, Davis, Davis, California 95616)

  • Eitan Gerstner

    (Business School, Loughborough University, Loughborough, Leicestershire LE11 3TU, United Kingdom)

  • Yinghui (Catherine) Yang

    (Graduate School of Management, University of California, Davis, Davis, California 95616)

Abstract

Many services are delivered to a (large) number of customers simultaneously within a confined zone (e.g., restaurants, resorts, trains, and airplanes). Under unexpected high demand, customers experience discomfort from two major sources: (a) the that arises when too many customers (i.e., sardines) compete for space and service resources, and (b) the that results from an exit cost incurred by customers who self-select to “escape” the unpleasant service. This paper investigates the optimal compensation and pricing policies under these two effects. We find that offering compensation to sardines can improve profit and social welfare. However, consumers do benefit when compensated for the discomfort from crowding. This paper also provides insights by exploring the impact of changes in the two effects on price and profit.

Suggested Citation

  • Rachel R. Chen & Eitan Gerstner & Yinghui (Catherine) Yang, 2009. "—Should Captive Sardines Be Compensated? Serving Customers in a Confined Zone," Marketing Science, INFORMS, vol. 28(3), pages 599-608, 05-06.
    • Handle: RePEc:inm:ormksc:v:28:y:2009:i:3:p:599-608
    DOI: 10.1287/mksc.1080.0428
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    References listed on IDEAS

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    Cited by:

    1. Rachel R. Chen & Eitan Gerstner & Yinghui (Catherine) Yang, 2012. "Customer Bill of Rights Under No-Fault Service Failure: Confinement and Compensation," Marketing Science, INFORMS, vol. 31(1), pages 157-171, January.
    2. Halbheer, Daniel & Gärtner, Dennis L. & Gerstner, Eitan & Koenigsberg, Oded, 2018. "Optimizing service failure and damage control," International Journal of Research in Marketing, Elsevier, vol. 35(1), pages 100-115.
    3. Roland T. Rust & Ming-Hui Huang, 2014. "The Service Revolution and the Transformation of Marketing Science," Marketing Science, INFORMS, vol. 33(2), pages 206-221, March.

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