Article ID: | iaor20032257 |
Country: | United States |
Volume: | 48 |
Issue: | 2 |
Start Page Number: | 207 |
End Page Number: | 221 |
Publication Date: | Feb 2002 |
Journal: | Management Science |
Authors: | Gans Noah |
Keywords: | service |
We develop a model of customer choice in response to random variation in quality. The choice model yields closed-form expressions which reflect the effect of competing suppliers' service quality on the long-run fraction of purchases a customer makes at the various competitors. We then use the expressions as the basis of simple normative models for suppliers seeking to maximize their long-run average profits. The results provide insight into the effect of switching behavior on the service levels offered by competing suppliers.