Recently, large-scale, Web-based service marketplaces, where many small service providers compete among themselves in catering to customers with diverse needs, have emerged. Customers who frequent these marketplaces seek quick resolutions and thus are usually willing to trade prices with waiting times. The main goal of this paper is to discuss the role of the moderating firm in facilitating information gathering, operational efficiency, and communication among agents in service marketplaces. Surprisingly, we show that operational efficiency may be detrimental to the overall efficiency of the marketplace. Furthermore, we establish that to reap the “expected” gains of operational efficiency, the moderating firm may need to complement the operational efficiency by enabling communication among its agents. The study emphasizes the scale of such marketplaces and the impact it has on the outcomes. This paper was accepted by Yossi Aviv, operations management.

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This paper investigates an optimal sequencing and dynamic pricing problem for a two-class queueing system. Using a Markov Decision Process based model, we obtain structural characterizations of optimal policies. In particular, it is shown that the optimal pricing policy depends on the entire queue length vector but some monotonicity results prevail as the composition of this vector changes. A numerical study finds that static pricing policies may have significant suboptimality but simple dynamic pricing policies perform well in most situations.