How Much Is a Reduction of Your Customers' Wait Worth? An Empirical Study of the Fast-Food Drive-Thru Industry Based on Structural Estimation Methods

Allon, Gad; Federgruen, Awi; Pierson, Margaret

doi:10.1287/msom.1110.0343

Cited by 139 publications

(65 citation statements)

References 35 publications

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“…The causal link between queuing time and firm revenues is an important topic in queue management research. Recent well-cited studies on this topic include those by Allon et al (2011), Lu et al (2013), Akşin et al (2013), Batt and Terwiesch (2015), and Song et al (2015). Song et al (2015) use a DID model to show that a dedicated queuing system reduces waiting time relative to a pooled queuing system.…”

Section: Miscellaneous Topics (Online Appendix Table A6)mentioning

confidence: 99%

OM Forum—Causal Inference Models in Operations Management

Lim

Reza

et al. 2017

M&SOM

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Abstract. Operations management (OM) researchers have traditionally focused on developing normative mathematical models that prescribe what managers and firms should do. Recently, there has been increased interest in understanding what managers and firms actually do and the factors that drive these decisions. To advance this understanding, empirical investigation using causal inference models is critical. However, in many contexts, the ability to obtain causal inferences is fraught with the challenges of endogeneity and selection bias. This paper describes five empirical tools that have been widely used in economics to address these challenges and how they can be adopted by OM researchers. We also present an example that illustrates how the various attributes of big data-variety, velocity, and volume-can be useful in addressing the endogeneity bias.

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Section: Miscellaneous Topics (Online Appendix Table A6)mentioning

confidence: 99%

OM Forum—Causal Inference Models in Operations Management

Lim

Reza

et al. 2017

M&SOM

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show abstract

“…In the context of the US auto market, Olivares and Cachon (2009) find that greater competition among dealers results in higher service levels. Allon et al (2011) develop a structural estimation model to quantify the impact of wait time (as opposed to inventory stockout rate, pricing transparency, and transaction expertise) on consumer demand in the US fast-food industry. Our work differs markedly from these contributions.…”

Section: Literature Reviewmentioning

confidence: 99%

“…Secondly, because we have estimates of sales from agents, we do not need to impute them through the use of a structural model, as Allon et al (2011) do. Thirdly, to the best of our knowledge, we are the first to empirically study how the reduction in demand related to stockouts varies with the level of competitive intensity that firms (agents, in our context) face.…”

Section: Literature Reviewmentioning

confidence: 99%

Mobile Money: The Effect of Service Quality and Competition on Demand

Balasubramanian¹,

Drake²

2015

SSRN Journal

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“…In traditional service industries, theoretical models have examined competition when consumer demand depends on price and service levels (So 2000, Cachon and Harker 2002, Allon and Federgruen 2007, Bernstein and Federgruen 2007, and in empirical OM research several studies have tested some of these and related theories in, e.g., the fast food industry (Allon et al 2011) and the banking industry (Buell et al 2014). In manufacturing industries, in contrast, service competition has been the subject of theoretical models in OM, e.g., service competition between a manufacturer and a retailer (Cohen and Whang 1997), between retailers that interact strategically with a manufacturer (Tsay and Agrawal 2000), and between manufacturers (Lu et al 2011).…”

Section: Related Literaturementioning

confidence: 99%

Service Competition and Product Quality in the U.S. Automobile Industry

2012

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We study the impact of service attributes (warranty length, after-sales service quality) on consumer demand in the U.S. automobile industry, examining the presence of complementarities/substitution between service attributes and product quality. Our results estimate a median willingness to pay for one year of a warranty of approximately $850, which is equivalent to 3.1% of the median vehicle price in our sample. We find that, for a car with median characteristics, the effect on consumer utility of a 1% price decrease is equivalent, all else being equal, to increasing product quality by 2.2%, and is in turn equivalent to increasing the warranty length by 8%. Our results also indicate that service attributes play a compensatory role with respect to product quality; i.e., the impact of warranty length and service quality on demand increases when product quality decreases. Conversely, both service metrics are complementary with respect to demand; i.e., the better the service quality, the higher the marginal effect of longer warranties. Our results thus imply that, in our period of analysis, warranties played a more important role for American firms than for foreign firms, consistent with the fact that American manufacturers exhibited lower product quality and higher service quality than nonAmerican firms. We study the impact of service attributes (warranty length, after-sales service quality) on consumer demand in the U.S. automobile industry, examining the presence of complementarities/substitution between service attributes and product quality. Our results estimate a median willingness to pay for one year of warranty of about $850, which is equivalent to 3.1% of the median vehicle price in our sample. Wend that, for a car with median characteristics, the effect on consumer utility of a 1% price decrease is equivalent, all else being equal, to increasing product quality by 2.2%, and is in turn equivalent to increasing the warranty length by 8%. Our results also indicate that service attributes play a compensatory role with respect to product quality, i.e., the impact of warranty length and service quality on demand increases when product quality decreases. Conversely, both service metrics are complementary with respect to demand, i.e., the better the service quality, the higher the marginal effect of longer warranties. Our results thus imply that, in our period of analysis, warranties played a more important role for American firms than for foreign firms, consistent with the fact that American manufacturers exhibited lower product quality and higher service quality than non-American firms. AbstractWe study the impact of service attributes (warranty length, after-sales service qual-

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How Much Is a Reduction of Your Customers' Wait Worth? An Empirical Study of the Fast-Food Drive-Thru Industry Based on Structural Estimation Methods

Cited by 139 publications

References 35 publications

OM Forum—Causal Inference Models in Operations Management

OM Forum—Causal Inference Models in Operations Management

Mobile Money: The Effect of Service Quality and Competition on Demand

Service Competition and Product Quality in the U.S. Automobile Industry

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