Near‐Optimality of Coarse Service Grades for Customer Differentiation in Queueing Systems

Near‐Optimality of Coarse Service Grades for Customer Differentiation in Queueing Systems We analyze a service firm that caters to price and delay‐sensitive customers who are differentiated on both their value for the service and the cost of waiting. There is a continuum of customer types in our setting and we model each customer's cost of waiting to be linear in the delay incurred with a multiplier that is an increasing linear or sub‐linear function of the customer's value for the service. Using a large system approach, we characterize the firm's revenue maximizing menu of price and delay quotations and the value of customer differentiation. We further characterize the value of offering coarse or few service grades and find that offering two service grades is asymptotically optimal on the typical square‐root scale, relative to the optimal policy. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png Production and Operations Management Wiley

Near‐Optimality of Coarse Service Grades for Customer Differentiation in Queueing Systems

Loading next page...
 
/lp/wiley/near-optimality-of-coarse-service-grades-for-customer-differentiation-nPsv3jAAfx
Publisher
Wiley Subscription Services, Inc., A Wiley Company
Copyright
© 2018 Production and Operations Management Society
ISSN
1059-1478
eISSN
1937-5956
D.O.I.
10.1111/poms.12818
Publisher site
See Article on Publisher Site

Abstract

We analyze a service firm that caters to price and delay‐sensitive customers who are differentiated on both their value for the service and the cost of waiting. There is a continuum of customer types in our setting and we model each customer's cost of waiting to be linear in the delay incurred with a multiplier that is an increasing linear or sub‐linear function of the customer's value for the service. Using a large system approach, we characterize the firm's revenue maximizing menu of price and delay quotations and the value of customer differentiation. We further characterize the value of offering coarse or few service grades and find that offering two service grades is asymptotically optimal on the typical square‐root scale, relative to the optimal policy.

Journal

Production and Operations ManagementWiley

Published: Jan 1, 2018

Keywords: ; ;

References

You’re reading a free preview. Subscribe to read the entire article.


DeepDyve is your
personal research library

It’s your single place to instantly
discover and read the research
that matters to you.

Enjoy affordable access to
over 18 million articles from more than
15,000 peer-reviewed journals.

All for just $49/month

Explore the DeepDyve Library

Search

Query the DeepDyve database, plus search all of PubMed and Google Scholar seamlessly

Organize

Save any article or search result from DeepDyve, PubMed, and Google Scholar... all in one place.

Access

Get unlimited, online access to over 18 million full-text articles from more than 15,000 scientific journals.

Your journals are on DeepDyve

Read from thousands of the leading scholarly journals from SpringerNature, Elsevier, Wiley-Blackwell, Oxford University Press and more.

All the latest content is available, no embargo periods.

See the journals in your area

DeepDyve

Freelancer

DeepDyve

Pro

Price

FREE

$49/month
$360/year

Save searches from
Google Scholar,
PubMed

Create lists to
organize your research

Export lists, citations

Read DeepDyve articles

Abstract access only

Unlimited access to over
18 million full-text articles

Print

20 pages / month

PDF Discount

20% off