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The potentially negative effects of cooperation in service systems

  • Hakjin Chung (a1), Hyun-Soo Ahn (a2) and Rhonda Righter (a3)

Abstract

The ‘Price of Anarchy’ states that the performance of multi-agent service systems degrades with the agents’ selfishness (anarchy). We investigate a service model in which both customers and the firm are strategic. We find that, for a Stackelberg game in which the server invests in capacity before customers decide whether or not to join, there can be a ‘Benefit of Anarchy’, that is, customers acting selfishly can have a greater overall utility than customers who are coordinated to maximize their overall utility. We also show that customer anarchy can be socially beneficial, resulting in a ‘Social Benefit of Anarchy’. We show that such phenomena are rather general and can arise in multiple settings (e.g. in both profit-maximizing and welfare-maximizing firms, in both capacity-setting and price-setting firms, and in both observable and unobservable queues). However, the underlying mechanism leading to the Benefit of Anarchy can differ significantly from one setting to another.

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Copyright

Corresponding author

*Postal address: KAIST College of Business, Seoul, 02455, Republic of Korea. Email address: hakjin.chung@kaist.ac.kr
**Postal address: Ross School of Business, University of Michigan, Ann Arbor, MI 48109, USA. Email address: hsahn@umich.edu
***Postal address: Department of Industrial Engineering and Operations Research, University of California, Berkeley, CA 94720, USA. Email address: rrighter@ieor.berkeley.edu

References

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The potentially negative effects of cooperation in service systems

  • Hakjin Chung (a1), Hyun-Soo Ahn (a2) and Rhonda Righter (a3)

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