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Managing service capacity with boundedly rational consumers under social interactions: A chaos perspective

Chengzhang Li (Department of Business Administration, Harbin Institute of Technology, Harbin, China)
Minghui Jiang (Department of Business Administration, Harbin Institute of Technology, Harbin, China)
Xuchuan Yuan (School of Business, Singapore University of Social Sciences, Singapore)

Kybernetes

ISSN: 0368-492X

Article publication date: 10 June 2019

Issue publication date: 20 February 2020

279

Abstract

Purpose

Consumers are inclined to join longer queues due to social interactions in service consumptions. This purchase behavior brings in operational challenges in terms of capacity planning, which affects consumers’ demand, leading to an unstable and fluctuated arrival process. This paper aims to investigate the dynamic characteristics of the arrival process of a service system with boundedly rational consumers whose purchase decisions are influenced by the queue length under social interactions.

Design/methodology/approach

Consumers’ bounded rationality is modeled based on the random utility theory. Due to social interactions, the equilibrium queue length and its interaction with the expected waiting time affect consumers’ value perception. The authors first analyze the optimal service capacity decision with or without considering the influence of social interactions in a static setting. They then focus on the dynamic characteristics of the arrival process by a one-dimensional dynamical model in terms of the arrival rate.

Findings

This paper finds that the service system can behave chaotic in terms of arrival rate dynamics under social interactions. The results highlight the dynamical complexity of a simple service system due to consumers’ behavioral factors and the influence of social interactions, which may be the critical drivers leading to fluctuated and uneven demand.

Originality/value

The findings demonstrate that due to consumers’ limited cognitive ability and the influence of social interactions, the demand to a service system can be stable, periodic or even chaotic in terms of the arrival process. This study provides an alternative explanation to the observed demand fluctuations in various service processes under the influence of social interactions, which is important for service providers to effectively manage service capacity to achieve a stable service process and improve operational efficiency.

Keywords

Acknowledgements

The authors research was supported by National Natural Science Foundation of China Grant No. 71502044, China Postdoctoral Science Foundation Grant No. 2015M570300 and the research grant from Harbin Institute of Technology.

Citation

Li, C., Jiang, M. and Yuan, X. (2020), "Managing service capacity with boundedly rational consumers under social interactions: A chaos perspective", Kybernetes, Vol. 49 No. 3, pp. 660-680. https://doi.org/10.1108/K-09-2018-0489

Publisher

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Emerald Publishing Limited

Copyright © 2019, Emerald Publishing Limited

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