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The Protection Economy: Occasional Service Failure as a Business Model

Abstract : Should a provider deliver a reliable service or should it allow for occasional service failures? This paper derives conditions under which randomizing service quality can benefit the provider and society. In addition to cost considerations, heterogeneity in customer damages from service failures allows the provider to generate profit from selling damage prevention services or offering compensation to high-damage customers. This strategy is viable even when reputation counts and markets are competitive.
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https://hal-hec.archives-ouvertes.fr/hal-02002693
Contributor : Antoine Haldemann <>
Submitted on : Thursday, January 31, 2019 - 7:09:21 PM
Last modification on : Friday, February 1, 2019 - 1:24:32 AM

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  • HAL Id : hal-02002693, version 1

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Eitan Gerstner, Daniel Halbheer, Oded Koenigsberg. The Protection Economy: Occasional Service Failure as a Business Model. 2015. ⟨hal-02002693⟩

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