Congestion-Based Leadtime Quotation and Pricing for Revenue Maximization with Heterogeneous Customers

Abstract

This paper studies a queuing model where two customer classes compete for a given resource and each customer is dynamically quoted a menu of price and leadtime pairs upon arrival. Customers select their preferred pairs from the menu and the server is obligated to meet the quoted leadtime. Customers have convex–concave delay costs. The firm does not have information on a given customer’s type, so the offered menus must be incentive compatible. A menu quotation policy is given and proven to be asymptotically optimal under traditional large-capacity heavy-traffic scaling. Full paper available at https://doi.org/10.1007/s11134-012-9288-8

Keywords: Asymptotic optimality, Dynamic scheduling, Leadtime quotation, Dynamic pricing