Research Information System
4th World Conference P&OM , Amsterdam, Netherlands, 1 - 05 July 2012, pp.111-122
We consider the joint pricing and inventory problem of a capacity constrained service facility.
There are several classes of customers who are delay sensitive. We model the problem with
an M/M/1 queueing system with non-preemptive priorities. We approximate the problem and
give closed form solutions for the inventory decisions. We also provide simple and explicit
solutions when there is a single customer type. We also show that the price given by the first
order conditions are incentive compatible in the sense that they optimize the profit of the service
facility even if it does not have any information about an arriving customer and let the
customer choose a price from the menu of prices.