Article ID: | iaor20108722 |
Volume: | 9 |
Issue: | 5 |
Start Page Number: | 386 |
End Page Number: | 398 |
Publication Date: | Nov 2010 |
Journal: | Journal of Revenue and Pricing Management |
Authors: | Huh Woonghee Tim, Ayvaz Nur |
Keywords: | allocation: resources, programming: dynamic |
Allocation of a limited capacity of resources among several customer types is a critical decision encountered by many manufacturing and service firms. We tackle this problem by focusing on a hospital setting and formulate a general model that is applicable to various resource allocation problems of a hospital. To this end, we consider a system with multiple customer classes that display different reactions to the delays in service. By adopting a dynamic‐programming approach, we show that the optimal policy for a system involving both lost sales and backorders is not simple but exhibits desirable monotonicity properties. Furthermore, we propose a simple threshold heuristic policy that performs well in our experiments.