An Optimal Pricing Strategy in An M/M/1 Queueing System Based on Customer`s Sojourn Time-Dependent Reward Level

- Journal title : The Journal of the Korea Contents Association
- Volume 16, Issue 7, 2016, pp.146-153
- Publisher : The Korea Contents Association
- DOI : 10.5392/JKCA.2016.16.07.146

Title & Authors

An Optimal Pricing Strategy in An M/M/1 Queueing System Based on Customer`s Sojourn Time-Dependent Reward Level

Lee, Doo Ho;

Lee, Doo Ho;

Abstract

This work studies the equilibrium behavior of customers and optimal pricing strategies of the sever in a continuous-time M/M/1 queueing system. In this work, we consider two pricing models. The first one is called the ex-ante payment scheme where the server charges a flat price for all services, and the second one is called the ex-post payment scheme where the server charges a price that is proportional to the time a customer spends in the system. In each pricing model, the departing customer receives the reward that is inversely proportional to his/her sojourn time. The server should make the optimal pricing decisions in order to maximize its expected profit per unit time in each payment scheme. This work also investigates customer`s equilibrium joining or balking behaviors under server`s optimal pricing strategies. Numerical experiments are conducted to help the server best select one between two pricing models.

Keywords

Optimal Pricing;Equilibrium Behavior;Profit Maximization;M/M/1 Queueing System;

Language

Korean

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