Impact of Self-Service Technology in Designing a Service Delivery System

Self-service technologies have been widely adopted in those industries involving delivering physical products by services, in which consumers evaluate the product both from the product value and the service value. A typical service delivery system usually involves sales agents or self-service technology, e.g., online service or kiosks, to serve consumers by a co-production process, i.e., both the sales agent (or self-service machine) and the consumers should exert efforts with corresponding service costs. By modeling the co-production output with a Cobb-Douglas (CD) function, we establish a three-sided principle-agent model to study the value of self-service technology in designing a service delivery system when the sales agent's service cost is private information. We first characterize the main tradeoff between the sales agent and the self-service machine when the firm provides only one service. Then, we analyze the value of the self-service machine when the firm can provide both services. Interestingly, we find that the firm may possibly provide both services, i.e., the sales agent and the self-service machine, when the information asymmetry level is high and the self-service machine's service cost is mediate. Moreover, when both services are offered, only the efficient sales agent will be contracted and the inefficient sales agent are screened out of market by the self-service machine, i.e., the self-service machine can help the firm to eliminate the information rent. We also investigate how the firm's service weight in the coproduction process and information asymmetry influence the consumer surplus, the firm's choices, the contract parameters, and the corresponding profits