Optimal incentive-compatible priority pricing for the M/M/1 queue
Operations Research
Optimal Pricing of Priority Services
Operations Research
Scheduling with Inserted Idle Time: Problem Taxonomy and Literature Review
Operations Research
Analysis, Design, and Control of Queueing Systems
Operations Research
Product Differentiation and Capacity Cost Interaction in Time and Price Sensitive Markets
Manufacturing & Service Operations Management
Optimal Leadtime Differentiation via Diffusion Approximations
Operations Research
Operations Systems with Discretionary Task Completion
Management Science
Dynamic Pricing and Lead-Time Quotation for a Multiclass Make-to-Order Queue
Management Science
Management Science
Competition in Service Industries with Segmented Markets
Management Science
Manufacturing & Service Operations Management
Queueing Systems: Theory and Applications
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How should a firm design a price/lead-time menu and scheduling policy to maximize revenues from heterogeneous time-sensitive customers with private information about their preferences? We consider this question for a queueing system with two customer types and provide the following results. First, we develop a novel problem formulation and solution method that combines the achievable region approach with mechanism design. This approach extends to menu design problems for other systems. Second, the work conserving cμ priority rule, known to be delay cost minimizing, incentive-compatible, and socially optimal, need not be revenue maximizing. A strategic delay policy may be optimal: It prioritizes impatient customers, but artificially inflates the lead times of patient customers. This suggests a broader guideline: Revenue-maximizing firms that lack customer-level demand information should also consider customer incentives, not only operational constraints, in their scheduling policies. Third, we identify general necessary and sufficient conditions for optimal strategic delay: a price, a lead-time, and a segment-size condition. We translate these into demand and capacity parameter conditions for cases with homogeneous and heterogeneous valuations for each type. In some cases strategic delay is optimal if capacity is relatively abundant, in others if it is relatively scarce.