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Optimal pricing and scheduling control of product shipping

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  • Tianhu Deng
  • Ying‐Ju Chen
  • Zuo‐Jun Max Shen

Abstract

In this article, we seek to understand how a capacity‐constrained seller optimally prices and schedules product shipping to customers who are heterogeneous on willingness to pay (WTP) and willingness to wait (WTW). The capacity‐constrained seller does not observe each customer's WTP and WTW and knows only the aggregate distributions of WTP and WTW. The seller's problem is modeled as an M/M/Ns queueing model with multiclass customers and multidimensional information screening. We contribute to the literature by providing an optimal and efficient algorithm. Furthermore, we numerically find that customers with a larger waiting cost enjoys a higher scheduling priority, but customers with higher valuation do not necessarily get a higher scheduling priority. © 2015 Wiley Periodicals, Inc. Naval Research Logistics 62: 215–227, 2015

Suggested Citation

  • Tianhu Deng & Ying‐Ju Chen & Zuo‐Jun Max Shen, 2015. "Optimal pricing and scheduling control of product shipping," Naval Research Logistics (NRL), John Wiley & Sons, vol. 62(3), pages 215-227, April.
    • Handle: RePEc:wly:navres:v:62:y:2015:i:3:p:215-227
    DOI: 10.1002/nav.21624
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