Pricing and capacity allocation under asymmetric information using Paris Metro pricing

Pricing and capacity allocation under asymmetric information using Paris Metro pricing

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Article ID: iaor200968898
Country: United Kingdom
Volume: 5
Issue: 3
Start Page Number: 265
End Page Number: 279
Publication Date: May 2009
Journal: International Journal of Operational Research
Authors: , ,
Keywords: service
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.

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