The Impact of Service-Time Uncertainty and Anticipated Congestion on Customers' Waiting-Time Decisions

Abstract

Customers often decide between service providers on the basis of their anticipated waiting times. The duration of the wait depends on two factors: the customer processing speed at the service location and the level of congestion at the time of arrival. While processing speed is an intrinsic operating characteristic of a service provider, congestion is a contingent characteristic that depends on customers' choices between the service provider and its competitors. Consequently, a customer's waiting time at a service location is characterized by an externality because it depends on the concurrent choices made by other customers. In this article, the authors examine how customers account for this externality when choosing between service providers that differ in the uncertainty surrounding their service times. The authors show that the uncertainty surrounding anticipated congestion at service locations suppresses risk aversion with respect to service times. However, if the overall market is expected to be over- or undercrowded, then risk aversion is restored and customer choices favor the low-uncertainty service provider. A partial explanation for the variance in customers' decision strategies lies in the extent to which they focus on the arrival process versus the service process when making their decision.