Social Interactions in Queues: Pricing Decision with Loss-averse Customers

Abstract

In social interaction, customers can observe the number of other customers receiving service and select queues with more customers. Simultaneously, customers in the queue anticipate waiting times and worry about utility loss. This study explores the impact of loss aversion psychology on customer queuing strategies, service provider pricing, and revenue in the context of social interaction. Firstly, we consider homogeneous customers and analyze the influence of loss aversion psychology on their queuing decisions and service choices in social interaction. Subsequently, we extend our investigation to heterogeneous customers, considering differences in customers’ sensitivity to social interaction. Social interaction and loss aversion are crucial in customer queuing decisions, affecting their perception of service utility and equilibrium decision-making. Social interaction and loss aversion also influence service providers’ revenue, necessitating tailored service pricing and strategies. This research provides profound insights into customer loss aversion behavior in the context of social interaction and offers practical service strategies for service providers.

Keywords

Social interaction / loss aversion / queuing strategy / pricing decision

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Systems Engineering Society of China and Springer-Verlag GmbH Germany