Title: Pricing and capacity allocation under asymmetric information using Paris Metro Pricing

Authors: Antonios Printezis, Apostolos Burnetas, Gopalakrishnan Mohan

Addresses: Department of Management, School of Global Management and Leadership, Arizona State University, P.O. Box 37100, Phoenix, AZ 85069-7100, USA. ' Department of Mathematics, University of Athens, Panepistemiopolis 157 84, Athens, Greece. ' Department of Management, School of Global Management and Leadership, Arizona State University, P.O. Box 37100, Phoenix, AZ 85069-7100, USA

Abstract: We consider a Paris Metro Pricing (PMP) approach for providing service to two classes of customers differentiated by their delay sensitivity. We develop a leader-follower game, where the leader is the service provider who sets the price and the customers respond by deciding whether to join or balk. We derive the customer behaviour as the Nash equilibrium of a multi-person game and obtain the revenue maximising price pairs for all combinations of arrival rates from each class to each server. We finally derive the capacity threshold in such domain and its impact on customer accessibility to the product or service.

Keywords: queueing; capacity management; PMP; Paris metro pricing; capacity allocation.

DOI: 10.1504/IJOR.2009.025196

International Journal of Operational Research, 2009 Vol.5 No.3, pp.265 - 279

Published online: 16 May 2009 *

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