Capacity competition of make-to-order firms

Authors:
Hong Chen;Yat-Wah Wan
Affiliations:
Cheung Kong Graduate School of Business, Oriental Plaza, Tower E3, Room 320,1 East Chang An Avenue, Beijing 100738, P.R. China;Graduate Institute of Global Operations Strategy and Logistics Management, National Dong Hwa University, Hualien, Taiwan
Venue:
Operations Research Letters
Year:
2005

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Abstract

Two make-to-order firms, each modelled as a single-server queue, compete for a common stream of (potential) customers by setting their service capacities (rates) and service prices. Each customer maximizes her expected return by getting service from a firm or by balking. We completely characterize the Nash equilibrium of the competition.