Distance-Based Service Priority: An Innovative Mechanism to Increase System Throughput and Social Welfare

Abstract

Problem definition: The main goal of many nonprofit or nongovernmental organizations is to increase the number of customers who receive service (i.e., service coverage) and social welfare. However, the limited number of employees, volunteers, and service locations results in long service wait. In addition, getting customers living in remote areas to receive services by traveling long distances is difficult. We propose an innovative distance-based service priority policy that would reduce the service waiting time for customers who must travel farther for the service by giving them higher service priority, thereby providing them with a new incentive to seek service. Methodology/results: Using a game-theoretic queueing model, we show that the proposed policy can significantly attract more customers to a service. The increase can be up to 50% compared with the ordinary first-come-first-served service discipline. The policy can also achieve higher social welfare, however, that may come at the cost of reduced customer welfare. We therefore propose a possible remedy for a social planner to coordinate welfare under such circumstance. It ensures all stakeholders, including the service provider, customers, and society, can benefit from the policy at the same time. Finally, we compare our distance-based service priority policy with two existing strategies from the literature—namely, the price discrimination strategy and the probabilistic priority strategy. Managerial implications: Our proposed policy can play a pivotal role in a nonprofit service provider’s mission to increase service coverage and social welfare, especially when customers’ travel costs to obtain service are significant. Furthermore, our policy may create fewer implementation and fairness concerns compared with related strategies.