Optimal service policy with negative network externality under finite capacity

This study demonstrates that when one-way inter-type negative network externality arises from annoying behaviors between consumers, forbidding the annoying behavior underestimates the value of consumers who love to engage in such behavior and thus fail to reach the optimal profit. Meeting the preference of the majority of consumers ignores the possibility that serving the minority leads to the optimum. Strategically leaving the capacity underutilized may generate a higher profit than fully utilizing the capacity.