Incentive-compatible pricing for a service facility with joint production and congestion externalities

Article Abstract:

A study was conducted to analyze the pricing problem of a service facility during the joint production of services by customers and the facility. The facility was represented as a GI/GI/1 queue supporting customer-chosen service rates and linear delay costs. The queue model was embedded in an economic framework. Customer interarrival times were assumed to be independent and identically distributed random variables supporting finite mean and variance. Optimal incentive-compatible pricing strategies were determined to realize optimal arrival rates and entice customers to select optimal service rates. Results indicated that the service rates selected by customers are suboptimal for the facility because of congestion externalities. Findings also showed benefits of reimbursing customers for actual delay costs in the queue model.

Pricing Policy, Methods, Prices and rates, Pricing

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Incentive effects favor nonconsolidating queues in a service system: the principle-agent perspective

Article Abstract:

A study was conducted to analyze a service network wherein an agency assumes responsibility for satisfying a constraint on the anticipated waiting and service time experienced by clients. It is assumed that the agency coordinates facilities that are operating independently using a scheme for allocating compensation and customers to self-interested operators to reduce costs. Two kinds of customer allocation were then examined, namely one from a common queue and another from separate queues. In addition, a couple of allocation rules were analyzed. Results indicated the benefits of adopting a separate queue allocation scheme. Such a strategy offsets sacrifices on risk-pool benefits through incentives established for independent facilities.

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