We study the pricing problem for a firm with two servers where heterogeneous customers can choose between deterministic service and probabilistic service. We find that different queueing priority policies do not affect the firm's revenue but affect the firm's optimal pricing strategies. Specifically, when the flexible customers (who choose probabilistic service) have a high priority, the optimal price of the deterministic service could be lower than the one of the probabilistic service in a small or moderate market.
- Hotelling model
- Probabilistic service
ASJC Scopus subject areas
- Management Science and Operations Research
- Industrial and Manufacturing Engineering
- Applied Mathematics