Optimal Pricing Strategies and Customers’ Equilibrium Behavior in an Unobservable M/M/1 Queueing System with Negative Customers and Repair

Abstract

This work investigates the optimal pricing strategies of a server and the equilibrium behavior of customers in an unobservable M/M/1 queueing system with negative customers and repair. In this work, we consider two pricing schemes. The first is termed the ex‐post payment scheme, where the server charges a price that is proportional to the time spent by a customer in the system. The second scheme is the ex‐ante payment scheme, where the server charges a flat rate for all services. Based on the reward‐cost structure, the server (or system manager) should make optimal pricing decisions in order to maximize its expected profit per time unit in each payment scheme. This study also investigates equilibrium joining/balking behavior under the server’s optimal pricing strategies in the two pricing schemes. We show, given a customer’s equilibrium, that the two pricing schemes are perfectly identical from an economic point of view. Finally, we illustrate the effect of several system parameters on the optimal joining probabilities, the optimal price, and the equilibrium behavior via numerical examples.