Outsourcing via Service Competition
Management Science
Leadtime-Variety Tradeoff in Product Differentiation
Manufacturing & Service Operations Management
Computers and Industrial Engineering
Promised Delivery Time and Capacity Games in Time-Based Competition
Management Science
LTL logistics networks with differentiated services
Computers and Operations Research
On the modeling of demand spill for a stochastic demand system under competition
Operations Research Letters
Integrated pricing and capacity decision for a telecommunication service provider
Multimedia Tools and Applications
Incentive-Compatible Revenue Management in Queueing Systems: Optimal Strategic Delay
Manufacturing & Service Operations Management
Pricing Time-Sensitive Services Based on Realized Performance
Manufacturing & Service Operations Management
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In this paper, we study a profit-maximizing firm selling two substitutable products in a price and time sensitive market. The products differ only in their prices and delivery times. We assume that there are dedicated capacities for each product and that there is a standard industry delivery time for the regular (slower) product. The objective of the firm is to determine the delivery time of the express (faster) product and appropriately price the two products, taking into consideration the impact of delivery time reduction on capacity requirements and costs. We develop a model that integrates pricing and delivery time decisions with capacity requirements and costs, and study scenarios where the firm is constrained in capacity for none, one, or both product(s). We show how product differentiation decisions are influenced by capacity costs, and how the firm should adapt its differentiation strategy in response to a change in its operating dynamics. We first identify a market characteristic that governs the optimal pricing structure. We then show that the degree of product differentiation depends on both the absolute, as well as the relative values of the capacity costs. Provided that the capacity cost differential remains the same, higher capacity costs induce less time differentiation and less price differentiation. An increase in capacity cost differential increases price differentiation, but decreases time differentiation. The optimal prices depend, in addition to the above, on the market characteristic. We find that prices can actually decrease when the firm incurs capacity-related costs. We also explore the impact of substitutability on product differentiation, and illustrate our results in a numerical study.