A re-examination of experience service offering and regular service pricing under profit maximization

•A firm offers free experience service to induce customers to buy its regular service.•Free services should be sped up to move customers onto paid service if it is idle.•Free services should be slowed down to avoid delay in paid service if it is busy.•The price should be lowered to compensate for service delay if the demand is strong.•A greater price reduction is needed to keep customers happy in longer waiting lines.

A firm may offer an experience service free of charge to attract more customers to buy its regular service. This paper provides an economic analysis for interactions between the capacity-constrained firm and its waiting-averse customers, generating certain managerial insights. Free services should be sped up to move customers onto the paid service if it is idle, or slowed down to hold onto customers and avoid exacerbating congestion in the paid service if it is busy. A lower price should be charged for the regular service as compensation to customers for service delay if more of them buy that service. When more customers arrive for experience services, a greater price reduction should be offered to attract them into the regular service if it becomes more congested.