Admission Control Game with Capacity Borrowing

50 Pages Posted: 2 Aug 2021

See all articles by Tianxiang Wang

Tianxiang Wang

Fudan University - Department of Management Science

Peiwen Yu

Chongqing University - School of Economics and Business Admininstration

Jianqiang Hu

Fudan University

Date Written: July 29, 2021

Abstract

We study a decentralized admission control problem with capacity borrowing. In this problem, the admission decision is made by each server who is assigned dedicated capacity. However, a server can borrow capacity from other servers if his dedicated capacity is exhausted. The borrower compensates the lender by a payment equal to the ‘‘borrowing cost’’. Hence, the servers share their capacities via borrowing, but they also compete against each other for their pooled capacities. We formulate this problem as a stochastic dynamic game and characterize the equilibrium strategic admission behavior of servers. We show that the critical factors that affect the equilibrium behavior and the system revenue are the magnitude of the borrowing cost, the arrival rate of customers and the revenue difference between different classes of customers. We have identified conditions under which servers maximizing their own payoffs end up making decisions that benefit the system. Our study highlights the important roles that the borrowing cost plays in shaping servers' behavior in service systems and provides concrete guidance for practitioners to design a decentralized admission control system.

Keywords: admission control, stochastic dynamic game, capacity pooling, borrowing cost

JEL Classification: M00,D00,H00

Suggested Citation

Wang, Tianxiang and Yu, Peiwen and Hu, Jianqiang, Admission Control Game with Capacity Borrowing (July 29, 2021). Available at SSRN: https://ssrn.com/abstract=3895451 or http://dx.doi.org/10.2139/ssrn.3895451

Tianxiang Wang

Fudan University - Department of Management Science ( email )

220号 Handan Rd
Shanghai
China

Peiwen Yu (Contact Author)

Chongqing University - School of Economics and Business Admininstration ( email )

Shazheng Str 174, Shapingba District
Chongqing, Chongqing 400030
China

HOME PAGE: http://sites.google.com/view/peiwen-yu/

Jianqiang Hu

Fudan University ( email )

670 Guoshun Road
Siyuan Building, Room 508
Shanghai, 200433
China

HOME PAGE: http://www.fdsm.fudan.edu.cn/en/teacher/preview.aspx?UID=91946

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