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Coordination of staffing and pricing decisions in a service firm

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  • Doǧan A. Serel
  • Erdal Erel

Abstract

Customer demand is sensitive to the price paid for the service in many service environments. Using queueing theory framework, we develop profit maximization models for jointly determining the price and the staffing level in a service company. The models include constraints on the average waiting time and the blocking probability. We show convexity of the single‐variable subproblem under certain plausible assumptions on the demand and staffing cost functions. Using numerical examples, we investigate the sensitivity of the price and the staffing level to changes in the marginal service cost and the user‐specified constraint on the congestion measure. Copyright © 2008 John Wiley & Sons, Ltd.

Suggested Citation

  • Doǧan A. Serel & Erdal Erel, 2008. "Coordination of staffing and pricing decisions in a service firm," Applied Stochastic Models in Business and Industry, John Wiley & Sons, vol. 24(4), pages 307-323, July.
    • Handle: RePEc:wly:apsmbi:v:24:y:2008:i:4:p:307-323
    DOI: 10.1002/asmb.708
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    References listed on IDEAS

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