Article ID: | iaor20164184 |
Volume: | 62 |
Issue: | 8 |
Start Page Number: | 2412 |
End Page Number: | 2436 |
Publication Date: | Aug 2016 |
Journal: | Management Science |
Authors: | Afche Philipp, Pavlin J Michael |
Keywords: | marketing, decision, scheduling, combinatorial optimization, information |
How should a firm design a price/lead‐time menu and scheduling policy to maximize revenues from heterogeneous time‐sensitive customers with private information about their preferences? We consider a queueing system with multiple customer types that differ in their valuations for instant delivery and their delay costs. The distinctive feature of our model is that the ranking of customer preferences depends on lead times: patient customers are willing to pay more than impatient customers for long lead times, and vice versa for speedier service. We provide necessary and sufficient conditions, in terms of the capacity, the market size, and the properties of the valuation‐delay cost distribution, for three features of the optimal menu and segmentation: