Models of Herding Behavior in Operations Management

Queues are not only a nuisance in one’s life. Queues can also attract potential customers to a service or product whose utility is not well known prior to the purchasing decision. In addition, for some goods, it is difficult for the seller to communicate precisely the information that allows determining the utility of the good to its potential customer base2. Think of a dinner at a restaurant, going to a play or a movie, or choosing a ride in an amusement park. These goods involve a ‘physical’ experience, a ‘service’ that is difficult to evaluate ex ante. The good can also be a product. Think of a new, innovative product like a gadget with new features. Before buying the product, customers are not certain about the utility they will enjoy if they buy the product. The product could either deliver some positive surplus, but, is may also be that ‘it is not worth’ spending money. In many cases, customers do not know. A natural reaction to this lack of information is to seek complementary information about the product quality before making a purchasing decision. Such information could come from expert opinions, reviews, specialized literature etc. In this chapter, We thank Christine Parlour for bringing this poem to our attention. These goods are thus experience goods.