| Abstract: |
Setting appropriate service promises is a challenge for on-demand platforms. Speedy promises are widely believed to boost sales, but should all service providers adopt aggressive promises? In this study, we leverage a quasi-experimental setting where expedited service promises (ESPs) were introduced for a subset of food items on a platform in a staggered manner. Using a stacked difference-in-differences framework, we find that ESPs increased overall item sales by 22.9%, driven by a 32.4% rise in on-demand orders, while advance-scheduled orders remained unaffected. This resulted in an 11.9 percentage point increase in the share of on-demand orders. However, not all items benefit equally from speedy promises. Dishes that were frequently delivered earlier than requested prior to ESPs saw larger sales boosts compared to those that were consistently late. This highlights how customers evaluate service promises against actual on-time performance. Interestingly, the biggest beneficiaries of ESPs were hot dishes that were delivered early—i.e., those hot dishes with “slack” in their promises. This provides empirical evidence of “earliness costs” and the risks of quality deterioration when promises are overly conservative. Contrary to the common wisdom of “under-promise and over-deliver,” our findings suggest otherwise for hot dishes. After all, no one wants their fries to go soggy before pickup. Our results provide actionable insights for restaurants when deciding how to quote promises for their food items based on serving temperature and current on-time performance.
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Biography:
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Professor Yuan received her Ph.D. in Economics from Massachusetts Institute of Technology. Prior to obtaining her Ph.D., she worked briefly in the Emerging Markets Trading Desk at J. P. Morgan (now JPMorgan-Chase). Professor Yuan’s research focuses on developing innovative asset pricing theories that account for heterogeneous information and market frictions. She has been working on topics including (stock and bond market) market liquidity, repo and collateralized borrowing, dominant currencies, Central Bank Digital Currencies (CBDC), and Decentralized Finance. Her work has been published in prestigious journals such as the Journal of Finance, Review of Financial Studies, and Review of Economic Studies. As a member of FMG and CEPR, she has been awarded the Houblon-Norman Fellowship at the Bank of England.
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