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  • 2016
  • Working Paper

Operations in the On-Demand Economy: Staffing Services with Self-Scheduling Capacity

By: Itai Gurvich, Martin Lariviere and Antonio Moreno
  • Format:Print
  • | Language:English
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Abstract

Motivated by recent innovations in service delivery such as ride-sharing services and work-from-home call centers, we study capacity management when workers self-schedule. Our service provider chooses capacity to maximize its profit (revenue from served customers minus capacity costs) over a horizon. Because demand varies over the horizon, the provider benefits from flexibility to adjust its capacity from period to period. However, the firm controls its capacity only indirectly through compensation. The agents have the flexibility to choose when they will or will not work and they optimize their schedules based on the compensation offered and their individual availability. To guarantee adequate capacity, the firm must offer sufficiently high compensation. The goal of this paper is to examine how a firm that allows its agents to self schedule solves this problem.

An augmented newsvendor formula captures the tradeoffs for the firm and the agents. If the firm could keep the flexibility but summon as many agents as it wants (i.e,. have direct control) for the same wages it would not only generate higher profit, as is expected, but would also provide better service levels to its customers. If the agents require a "minimum wage" to remain in the agent pool they will have to relinquish some of their flexibility. To pay a minimum wage the firm must restrict the number of agents that can work in some time intervals.

The costs to the firm are countered by the self-scheduling firm's flexibility to match supply to varying demand. If the pool of agents is sufficiently large relative to peak demand, the firm earns more than it would if it had control of agents' schedules but had to maintain a fixed staffing level over the horizon.

Keywords

Strategic Servers; On-demand Economy; Independent Capacity; Distributed Systems; Uber; Service Operations; Performance Capacity

Citation

Gurvich, Itai, Martin Lariviere, and Antonio Moreno. "Operations in the On-Demand Economy: Staffing Services with Self-Scheduling Capacity." Working Paper, June 2016.
  • SSRN

About The Author

Antonio Moreno

Technology and Operations Management
→More Publications

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    • June 2022
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    Zalando: Becoming the Starting Point for Fashion

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    Worten Portugal: Becoming a Digital Marketplace

    By: Antonio Moreno, Pedro Amorim and Tonia Labruyere
    • October 2021 (Revised October 2021)
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    Operations in an Omnichannel World

    By: Antonio Moreno
More from the Authors
  • Zalando: Becoming the Starting Point for Fashion By: Antonio Moreno, Leela Nageswaran, Emilie Billaud and Federica Gabrieli
  • Worten Portugal: Becoming a Digital Marketplace By: Antonio Moreno, Pedro Amorim and Tonia Labruyere
  • Operations in an Omnichannel World By: Antonio Moreno
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