User Delay Costs and Internal Pricing for a Service Facility

This paper studies optimal pricing and capacity decisions for a service facility in an environment where users' delay cost is important. The model assumes a general nonlinear delay cost structure and incorporates the tradeoff between the delay cost and capacity cost. We find necessary and sufficient conditions for the optimality of a pricing rule that charges out service resources at their marginal capacity cost. We examine the issue of budgetary balance and find that net-value maximization entails a budget deficit for the service facility; that is, the service facility should be evaluated as a “deficit center.” The results provide guidelines under which the optimal magnitude of the deficit can be determined.

• 저널Management Science · 36(12) · 1502–1517
• 토픽Advanced Queuing Theory Analysis · Management Information Systems
• DOI10.1287/mnsc.36.12.1502
• 저자Sanjeev Dewan, Haim Mendelson