Charging more for priority via two-part tariff for accumulating priorities

Shir Moshe, Binyamin Oz*

*Corresponding author for this work

Research output: Contribution to journalArticlepeer-review

2 Scopus citations

Abstract

We consider an unobservable M/G/1 queue with accumulating priorities and strategic customers who pay for priority accumulation rates. We show that when affine pricing is introduced, multiple equilibria may exist. This is in contrast to the standard linear pricing case where the equilibrium strategy is unique. Furthermore, a revenue-maximizing operator may generate more revenue under the optimal affine pricing than under linear pricing. In particular, we show that if the utilization level is not too high, no other combination of a priority scheme and pricing generates more revenue than the optimal affine pricing of accumulating priorities.

Original languageAmerican English
Pages (from-to)652-660
Number of pages9
JournalEuropean Journal of Operational Research
Volume304
Issue number2
DOIs
StatePublished - 16 Jan 2023

Bibliographical note

Publisher Copyright:
© 2022 Elsevier B.V.

Keywords

  • Accumulating priorities
  • Nash equilibrium
  • Queueing
  • Revenue optimization
  • Strategic behavior

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