Disclosing Delivery Performance Information When Consumers Are Sensitive to Promised Delivery Time, Delivery Reliability, and Price

Abstract

Problem definition: We investigate how the characteristics of consumers and a service firm influence the firm’s optimal pricing and promised delivery-time decisions as well as the optimal investment in the quality of delivery reliability information available to consumers. Methodology/results: We use utility, queuing, and choice modeling theories to model consumers’ behavior and to find solutions to the firm’s profit maximization problem. Managerial implications: The optimal strategy is to disclose either error-free delivery reliability information or no information at all. We also delineate conditions for each of the two strategies to dominate. Funding: This research was supported by the General Research Fund (GRF) of the Hong Kong Research Grants Council under Research Project LU13500822. Supplemental Material: The online appendix is available at https://doi.org/10.1287/msom.2023.0223 .