Multi-Level Coordination and Decision-Making in Service Operations

Decisions in service operations are complex since they involve various interdependent decision-makers (agents) at different hierarchical levels, ranging from customer representatives over account managers to top executives. We formulate a three-level maintenance service problem as a stochastic decision-making model, with an account manager, supervisor, and worker at each of the three levels. The proposed incentive mechanism aligns the interests of lower level agents with the goals of the top agent. The agents' strategic interactions are analyzed game-theoretically and results show that a Pareto-efficient Nash equilibrium can be attained given certain organizational properties. Furthermore, we show that local information can be sufficient for organization-wide optimal decisions. In a final step, the three-level model is generalized for multi-level, i.e., multi-organizational-scale, systems. [<i>Service Science</i>, ISSN 2164-3962 (print), ISSN 2164-3970 (online), was published by Services Science Global (SSG) from 2009 to 2011 as issues under ISBN 978-1-4276-2090-3.]