Competing on price, speed, and reliability: How does bounded rationality matter?

Publikation: Bidrag til tidsskrift/Konferencebidrag i tidsskrift /Bidrag til avisTidsskriftartikelForskningpeer review

98 Downloads (Pure)


A firm’s delivery performance may have significant impact on the satisfaction and purchase behaviour of its customers. Empirical evidence has shown that customers are willing to pay a higher price for a faster and more reliable service. In this study, we address the interactions between the price, promised delivery time, and delivery-reliability level in a competitive setting. We model the problem as a competition among an arbitrary number of profit-maximizing firms facing boundedly rational customers who can choose to buy the service from one of the firms or balk. We prove the existence of a unique Nash equilibrium and propose a simple iterative algorithm that converges to the equilibrium. Furthermore, we compare our results with those in the existing literature and report interesting managerial insights. Our results suggest that having a clear understanding of customers’ bounded rationality level is crucial for businesses to determine their optimal decisions and position in the market both in monopolistic and competitive settings.
TidsskriftJournal of the Operational Research Society
Sider (fra-til)2059-2072
Antal sider14
StatusUdgivet - 2021


Dyk ned i forskningsemnerne om 'Competing on price, speed, and reliability: How does bounded rationality matter?'. Sammen danner de et unikt fingeraftryk.