Service Strategies and Pricing based on Heterogeneity of Service Values and Waitingcosts in Queuing System

Abstract

Purpose: This paper aims to study the corresponding optimal service strategies and pricing in the styled non-preemptive M/M/1 service systems from different objectives, which consider both heterogeneous waiting costs of customers and service values in customer segmentation. Design/methodology/approach: In this paper, the authors consider two service situations where customers cannot leave the service system (i.e. monopoly service system) and customers can leave the service system freely (i.e. non-monopoly service system), respectively. The authors study the following four different perspectives that are revenue, social welfare, social cost and utility of customers. The authors first build up a new model, then propose the related objective functions. Further, the authors optimize the corresponding functions and achieve the optimal results. Later, the authors propose the corresponding optimal strategies. Finally, the authors use a practical numerical case to verify the proposed results. Findings: The results of this paper indicates that the service provider should adopt classification services to gain the maximum revenue, the maximum social welfare and the minimum social costs by charging a priority fee in above two service systems. However, the service provider should cancel customer classification and keep regular customer only to obtain maximum utility. In the monopoly service system, both the optimal proportion priority customers and the revenue decrease with the increasing of the service rate, while in a non-monopoly service system, both of them are increasing with the service rate improving. Originality/value: This paper first considers both heterogeneity of service values and waiting costs in queuing system, then the author set up a new model based on this assumption. Moreover, the authors draw the corresponding management insights based on the optimal results, which were unavailable before.

Department(s)

Electrical and Computer Engineering

Comments

National Natural Science Foundation of China, Grant 71671092

Keywords and Phrases

Customer segmentation; Heterogeneous; Pricing strategy; Queuing system; Service operation; Service value

International Standard Serial Number (ISSN)

0368-492X

Document Type

Article - Journal

Document Version

Citation

File Type

text

Language(s)

English

Rights

© 2025 Emerald, All rights reserved.

Publication Date

23 Oct 2019

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