Priority option pricing in an M/M/m queue

Priority option pricing in an M/M/m queue

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Article ID: iaor20102897
Volume: 36
Issue: 6
Start Page Number: 700
End Page Number: 704
Publication Date: Nov 2008
Journal: Operations Research Letters
Authors: ,
Abstract:

We study a system where the service provider offers priority options. We identify the optimal option pricing policy, by deriving the optimal number a customer would buy and the customer's exercise policy as a function of system congestion, options remaining, time to expiration and possibility of balking.

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