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Pricing in Queues without Demand Information

Moshe Haviv

Hebrew University of Jerusalem - Department of Statistics

Ramandeep S. Randhawa

University of Southern California

March 23, 2012

We consider revenue and social optimization in an M/M/1 queue with price and delay sensitive customers, and study the performance of uninformed pricing that does not require any arrival rate information. We formally characterize the optimal uninformed price and its performance relative to pricing with precise arrival rate knowledge. For uniformly distributed customer valuations, under a large set of parameters, we find that uninformed prices can capture more than 99% of the optimal revenue and more than 85% of the optimal social welfare. We further prove that the performance of uninformed prices improves as the customers become more delay sensitive and is always better under revenue optimization compared with social optimization.

Number of Pages in PDF File: 31

Keywords: fixed pricing, static pricing, revenue management, welfare maximization, minimax regret, robust optimization

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Date posted: October 9, 2011 ; Last revised: July 13, 2013

Suggested Citation

Haviv, Moshe and Randhawa, Ramandeep S., Pricing in Queues without Demand Information (March 23, 2012). Available at SSRN: https://ssrn.com/abstract=1940993 or http://dx.doi.org/10.2139/ssrn.1940993

Contact Information

Moshe Haviv
Hebrew University of Jerusalem - Department of Statistics ( email )
Mount Scopus
Jerusalem, 91904
Ramandeep S. Randhawa (Contact Author)
University of Southern California ( email )
Marshall School of Business
BRI 401, 3670 Trousdale Parkway
Los Angeles, CA 90089
United States
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