Peaker Outsourcing for Service Systems with Time-Varying Arrival Rates

  • Authors:
  • Mariya Bondareva;Avi Seidmann

  • Affiliations:
  • -;-

  • Venue:
  • HICSS '12 Proceedings of the 2012 45th Hawaii International Conference on System Sciences
  • Year:
  • 2012

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Abstract

This paper studies a service system which functions as a cost center and has to meet quality constraints under non-stationary arrival rates. We propose the use of 'peaker' capacity services, characteristically used by the electric power industry for handling peak-load demands for power generation. Analogously, specialized teams of servers handle the base-load of transactions every day, and the in-house or outsourced peaker team services the peak-load demand. We study how peaker ownership choice and cost and profit optimizing behavior influence optimal peaker architecture (outsourcing and capacity decisions).