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Pricing surplus server capacity for mean waiting time sensitive customers

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  • Sinha, Sudhir K.
  • Rangaraj, N.
  • Hemachandra, N.

Abstract

We consider a queueing model wherein the resource is shared by two different classes of customers, primary (existing) and secondary (new), under a service level based pricing contract. This contract between secondary class customers and resource manager specifies unit admission price and quality of service (QoS) offered. We assume that the secondary customers' Poisson arrival rate depends linearly on unit price and service level offered while the server uses a delay dependent priority queue management scheme. We analyze the joint problem of optimal pricing and operation of the resource with the inclusion of secondary class customers, while continuing to offer a pre-specified QoS to primary class customers. Our analysis leads to an algorithm that finds, in closed form expressions, the optimal points of the resulting non-convex constrained optimization problem. We also study in detail the structure and the non-linear nature of these optimal pricing and operating decisions.

Suggested Citation

  • Sinha, Sudhir K. & Rangaraj, N. & Hemachandra, N., 2010. "Pricing surplus server capacity for mean waiting time sensitive customers," European Journal of Operational Research, Elsevier, vol. 205(1), pages 159-171, August.
    • Handle: RePEc:eee:ejores:v:205:y:2010:i:1:p:159-171
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    References listed on IDEAS

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    Cited by:

    1. Nandyala Hemachandra & Kamma Sri Naga Rajesh & Mohd. Abdul Qavi, 2016. "A model for equilibrium in some service-provider user-set interactions," Annals of Operations Research, Springer, vol. 243(1), pages 95-115, August.
    2. Moshe, Shir & Oz, Binyamin, 2023. "Charging more for priority via two-part tariff for accumulating priorities," European Journal of Operational Research, Elsevier, vol. 304(2), pages 652-660.
    3. Jeff Hong, L. & Xu, Xiaowei & Zhang, Sheng Hao, 2015. "Capacity reservation for time-sensitive service providers: An application in seaport management," European Journal of Operational Research, Elsevier, vol. 245(2), pages 470-479.

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