Service Markets

Summary
A key aspect of service systems is exploring and studying their economic and business components. Services are commonly part of an ecosystem that consists of other services (potentially competitors), service consumers, and further aspects such as underlying laws and regulations. This chapter focuses on the design and analysis of service markets, which define how services are purchased and exchanged. In particular, market engineering is discussed as a structured approach to study service markets. This chapter should be regarded as an entry point into this domain, and assumes no prior knowledge. Therefore, a key focal point is on establishing the fundamental aspects of service markets from an economic point of viewalong with amethodology (agent-based computational economics) for their study and analysis.

Review Questions
1. What assumptions do neo-classical markets impose, and how realistic are they?

2. What are the main components of the microeconomic framework of Smith and the market engineering framework of Weinhardt et al., respectively? What are their differences?

3. Explain the differences between the presented types of price differentiation and illustrate pros and cons by means of examples.

4. Imagine you want to sell a web service and determine its price. What kind of pricing mechanism would you as a service provider prefer?What kind of pricing scheme would you prefer if you were a consumer?

5. Describe in your own words the goals of agent-based computational economics? Provide examples of questions that can be studied using an ACE approach.