Reservation Fee Research Articles

An Equilibrium Search Model of the French Dual Market for Medical Services

The French market for specialist physician care has a dual structure, including a sector 1 with regulated fees, and a sector 2 where physicians can freely choose fees. Patients who undergo a sequential search process for the best medical offer develop a reservation fee decision rule. We analyzed physicians' decisions to work in sector 1 or in sector 2, and their choice of fee in sector 2. The model features several pure strategy equilibria that can be ordered with respect to patient welfare. Policy implications follow.

Desi Hoop Dreams: Pickup Basketball and the Making of Asian American Masculinity by Stanley I. Thangaraj

Reviewed by: Desi Hoop Dreams: Pickup Basketball and the Making of Asian American Masculinity by Stanley I. Thangaraj Harjant S. Gill Stanley I. Thangaraj, Desi Hoop Dreams: Pickup Basketball and the Making of Asian American Masculinity. New York: New York University Press, 2015. 288 pp. Based on over four years of research among the South Asian Basketball leagues in Atlanta, Stanley Thangaraj’s Desi Hoop Dreams is an insightful exploration into the processes of identity formation for young South Asian men growing up in suburban America. Basketball, and practices related to the sport, serves as a crucial site for gender development for the second generation South Asian (Indian, Pakistani, and Bangladeshi) men. Their on- and off-court performances are motivated by the desire to repudiate being stereotyped as tepid and nerdy by demonstrating their physical prowess and athletic abilities, a practice Thangaraj refers to as “manning up,” as they attempt to “fashion their own version of American masculinity” (5). In Chapter 1, Thangaraj introduces us to core members of the Atlanta Outkasts, a cohort of young South Asian men, mostly Muslim, who met playing basketball in local mosques and community centers, and are now part of Atlanta’s diverse pick-up basketball circuit. These players do not all fit seamlessly into the middle class, professional immigrants who have lived in Atlanta since 1960s and that make up the more visible diasporic community celebrated for its achievements as the respectable “model minority” (40). Yet they are confronted with the gendered stereotypes associated with Asian immigrants, including being portrayed as effeminate in popular culture for their passive obedience to the status quo and often aspiring to be just like their white counterparts (63). Instead, South Asian men most active in Atlanta’s basketball circuits belong to working class families, many of whom arrived in the 1980s and 1990s, and are still [End Page 957] striving to achieve the elusive middle class status. Basketball courts serve as space where young South Asian men simultaneously work through their feelings of inadequacy as sons of recent immigrants and their frustrations with their racialization within the popular American cultural imagination that often stereotypes them as spelling bee champions or terrorists (42). In a style reminiscent of Mira Nair’s seminal film Mississippi Masala (1991) that subverts popular conceptions of race and nationhood, Chapters 2 and 3 complicate conventional notions of race and belonging by exploring the relationships and dynamics at play when brown and black bodies occupy the same court. Thangaraj notes that South Asian players claim American-ness by “embodying black stylistics” and consuming African American cultural forms like basketball, hip-hop, and rap music (38–39). In doing so, they challenge societal expectations for South Asians to follow “a linear progression to whiteness” (63). While their on-court performance serves as a source of empowerment in resisting stereotypes, the players often stop short of reaching a broader understanding of racial dynamics at play in everyday life in the American South (39). Instead, players recast the basketball court as an exclusively South Asian space by excluding African American players from their teams and restricting their access to the court (63, 106). These chapters paint a complex picture of how the court serves as a microcosm for broader racial dynamics playing out between different working class communities who access public sporting arenas and other recreational spaces in Atlanta (54–57). Thangaraj notes that while African American players practice exclusion of South Asians by not picking them for their teams, South Asian players practice exclusion by using capital and social networks to “privatize” public gyms, blocking access to those who cannot afford to pay the reservation fees (54–57). In this sense, middle and working class South Asian communities in Atlanta are often “complicit in the displacement of (poor and working class) African Americans” (47). Ironically, while the South Asian players seem largely indifferent to African American and other communities’ histories and experiences of similar oppression, they evoke their own histories of marginalization by referencing ethnic and caste-based identities in their team names, using terms such as “Outkasts” and “Untouchables” (87). Drawing liberally on South Asian cultural forms, they deploy Hindi and Urdu epithets like “Kallu...

On the Impact of Sharing Information in Advance Reservation Systems

Services that allow advance reservations (AR) over the Internet differ in the information provided to customers about future availability of servers. In some services, customers observe the exact number of currently available servers prior to making decisions. In other services, customers are only alerted when a few servers remain available, while there are also services in which no information whatsoever is shared about the availability of servers. Examples for the first case can be found in entertainment services, where customers are allowed to choose their seats and observe the exact number of available seats. Examples for the second case can be found in lodging reservations websites, such as Booking.com, that alert potential customers only when a few available rooms are left. Booking of airline tickets is an example of the third case where no information is provided (typically, customers can choose seats but only after buying a ticket). In recent years, research on the impact of information on different queueing systems has emerged (see [1], for example). However, not much is known about the impact of information in systems that allow advance reservations. Our goal is to understand how di?erent information sharing policies affect the decision of customers whether to reserve a resource in advance or not. Towards this end, we define a game, in which customers either reserve a resource in advance or avoid advance reservation and take the risk that the resource will not be available when needed. Making advance reservation is associated with a fixed cost. This cost can be interpreted as a reservation fee, as the time or resources required for making the reservation, or as the cost of financing advance payment of the service. AR games were introduced in [2] and further investigated in [3]. In the model considered in that paper, customers are not informed about the number of available servers. In contrast, in this present work, we consider a set-up where customers can observe the state of the system prior to making a reservation. We first study a fully-observable game. In this game, customers observe the exact number of available servers. We determine the equilibrium structure and prove the existence and uniqueness of the equilibrium. We then consider a semi-observable game. In this game, the provider informs customers about the number of available servers only if this number is smaller or equal to some threshold. We assume that customers that are not informed realize that the number of available servers is greater than that threshold and take this fact under consideration upon making their decisions. We show that, in this case, there may be multiple equilibria and the number of equilibria depends on the AR cost. Finally, using simulations we show that, on average, the fraction of customers making AR decreases as more information is provided to the customers. More specifically, the fully observable policy yields the lowest number of reservations. In semi-observable policies, the fraction of customers making advance reservation increases as the threshold is lowered, and the best performance is achieved when no information at all is provided. Proofs of the results and more details about the simulation could be found in the working paper copy. There are still many open questions remaining about the impact of sharing information on customers behavior in advance reservation services. Possible directions for further research include systems where customers have incomplete knowledge of statistics, or systems where the provider shares imprecise information.

Leveraging Slack Capacity in IaaS Contract Cloud Services

This paper develops pricing and capacity planning models for a cloud provider taking into account the trade-off between service reliability and capacity utilization. The provider's objectives are to optimally allocate resources, price different types of cloud services, and ultimately extract the maximum revenue from the market. We first analyze two basic types of cloud services: contract and on-demand. We then propose hybrid models in which the two basic services simultaneously exist. For each hybrid model, we determine an optimal capacity planning strategy, optimal reservation fee, optimal per-usage fee, and corresponding service reliability. We conduct experiments to study how optimal solutions change with respect to critical system parameters such as service rate, market size, and service reliability. Our work provides a framework for resource allocation, service provision, and strategic planning in cloud computing practice.

Optimal reservation pricing strategy for a fashion supply chain with forecast update and asymmetric cost information

We address the reservation pricing problem for a two-echelon fashion supply chain in which the downstream manufacturer with private information on its operations cost (low or high type) reserves the capacity for a critical component from the upstream supplier before placing the final order. We consider the case when the demand forecast is partially updated. We find that a novel menu of reservation contracts containing the unit reservation fee with reservation quantity and final order could induce the manufacturer to reveal its operations cost information truthfully. We also show that the supplier should require less capacity reservation and charge a lower unit reservation fee if it has asymmetric information about the manufacturer’s operations cost. Finally, we analyse the effects of forecast update, and our results indicate that: (i) the supplier benefits from forecast update because the optimal reservation pricing strategy is designed to reveal the true information and meanwhile induce a higher capacity reservation; and (ii) a greater amount of forecast update decreases the supply chain deficit and increases the supplier’s agency cost.

Advance Reservation Games and the Price of Conservatism

Advance reservation (AR) services form a pillar of many branches of the economy, e.g., transportation, lodging, dining, and health care. There has also been increased interest in applying AR in cloud computing systems [1]. For instance, Moab Workload Manager [2] and IBM Platform Computing Solutions [3] support AR. In both of these packages, an administrator can decide whether or not to enable AR and define an AR pricing scheme. In most systems supporting AR, customers can choose whether making AR or not. Since the payoff of each customer is affected by decisions of other customers, it is natural to analyze the behavior of such systems as strategic games. In this work, we study a strategic non-cooperative game, referred to as an advance reservation game. In this game, players (customers) can reserve future resources in advance for a fixed reservation fee C. We consider a slotted loss system with N servers where customers are not flexible, i.e., they leave the system if they cannot be served at their desired time slots. Customers are not informed of the state of the system (i.e., the number of unreserved servers) prior to attempting a reservation. Thus, a customer opting not to make a reservation lowers its chance of finding a server available at the desired time. The number of customers in each slot is an i.i.d. Poisson random variable with parameter λ [4]. Customers have different lead times, where the lead time of a customer is defined as the time elapsing between its arrival and the slot starting time. Each customer only knows its own lead time. However, all lead times are derived from the same continuous distribution known by both the provider and the customers. In [5], we derive the equilibria structure of AR games. We show that for any C > 0, only two types of equilibria are possible. In the first type, none of the customers, regardless of their lead times, makes AR (non-make-AR equilibrium). In the second type, only customers with lead time greater than some threshold make AR (threshold equilibrium). Furthermore, we establish the existence of three different ranges of fees, such that if C falls in the first range only threshold equilibria exist, in the second range both threshold equilibria and a none-make-AR equilibrium exist, and in the third range only a none-make-AR equilibrium exists. In many cases, the fee C that maximizes the provider's profit lies in the second range. However, setting up a fee in that range carries also the risk of zero profit for the provider. Therefore, in order to properly set the AR fee, the provider should consider both the fee yielding the maximum possible profit and the fee yielding the maximum guaranteed profit. A guaranteed profit can be only achieved using fees falling within the first range. In this work, we introduce the concept of price of conservatism ( PoC ), which corresponds to the ratio of the maximum possible profit to the maximum guaranteed profit, and analyze it in different regimes. A greater PoC indicates greater potential profit loss if the provider opts to be conservative. First, we analyze a single-server regime, where we prove that for any fee the equilibrium is unique (the second range collapses in that case). Hence, PoC = 1 and the provider experiences no loss. Next, we analyze a many-server regime where λ = α N and N → ∞. We distinguish between the cases of overloaded and underloaded systems (i.e., α > 1 and α < 1 respectively). For the overloaded case, we show that PoC = α/(α--1). Hence, the price of conservatism increases in an unbounded fashion as α approaches one from above. Finally, for the underloaded case, we show that both the maximum and guaranteed profits converge to zero.

Horizontal Capacity Coordination for Risk Management and Flexibility: Pay Ex Ante or Commit a Fraction of Ex Post Demand?

Motivated by the dual-sourcing and contracting practices in the semiconductor industry, we study two prevailing types of contracts that deal with horizontal-capacity-coordination issues between two possible sources: an integrated device manufacturer (IDM) and a foundry. IDMs both design and manufacture semiconductor devices, whereas foundries concentrate only on manufacturing. Because production capacity is capital intensive, IDMs often make decisions on whether to manufacture each device internally or subcontract to foundries. Two types of contracts are most frequently used in such settings. Under α-contracts, a fixed fraction α of ex post realized demand is committed to subcontract to the foundry and serves as an incentive for the foundry to build capacity. Under reservation contracts, an ex ante capacity reservation fee is paid to the foundry as an incentive to build capacity. Because of the different nature of incentives under these contracts, it is unclear which type of contract maximizes the IDM's expected profit. Furthermore, IDMs and their customers often prefer dual sourcing to sole sourcing for risk-management purposes. This paper studies the relationship between the two types of contracts, both with and without dual-sourcing constraints and shows the effect of a dual-sourcing preference on contract selection. Our analysis offers supporting rationale for the coexistence of α-contracts and reservation contracts in practice and provides insights on horizontal capacity coordination beyond the semiconductor industry.

Flexible carrier–forwarder contracts for air cargo business

Passenger airlines (carriers), who carry nearly two-thirds of the worldwide airfreight, sell a significant portion of their cargo space through intermediaries called freight forwarders. Carriers also sell directly to shippers. In a typical carrier–forwarder contract, which can remain in effect anywhere from a few months to a year, a certain amount of capacity on specific recurring flights is preallocated (guaranteed) to the forwarder at a negotiated price per unit of capacity. Carriers often find it difficult to obtain full payment from the forwarders who typically pay freight charges only for the space actually used. Guaranteed allocations provide an incentive to forwarders to exert a greater effort on attracting demand. They, however, limit a carrier's ability to realise the highest possible revenue from cargo capacity. In this paper, we propose two flexible schemes that fall within the general contracting framework prevalent in the air cargo business. In the first scheme, the carrier determines an upfront fixed fee for reserving capacity but the freight rate is exogenous, whereas in the second scheme, there is no reservation fee, but the carrier chooses the freight rate. In both instances, we allow the carrier to adjust contract parameters, based on realised demand, a short time before the flight departs. Only those contract parameter adjustments that do not make the forwarder financially worse off are permitted. We show that this flexibility allows the carrier to achieve an efficient capacity allocation to the forwarder and the direct-ship demand streams under both mechanisms. Moreover, a carrier that charges a deposit for guaranteed allocation can induce the forwarder to simultaneously choose the optimal effort level and earn maximum profit.

Competitive Options, Supply Contracting, and Electronic Markets

This paper develops a framework for analyzing business-to-business (B2B) transactions and supply chain management based on integrating contract procurement markets with spot markets using capacity options and forwards. The framework is motivated by the emergence of B2B exchanges in several industrial sectors to facilitate such integrated contract and spot procurement. In the framework developed, a buyer and multiple sellers may either contract for delivery in advance (the “contracting” option) or they may buy and sell some or all of their input/output in a spot market. Contract pricing involves both a reservation fee per unit of capacity and an execution fee per unit of output if capacity is called. The key question addressed is the structure of the optimal portfolios of contracting and spot market transactions for the buyer and these sellers, and the pricing thereof in market equilibrium. Existence and structure of market equilibria are characterized for the associated competitive game between sellers with heterogeneous technologies, under the assumption that they know the buyer's demand function. This allows an explicit characterization of the price of capacity options and the value of managerial flexibility, as well as providing conditions under which B2B exchanges are efficient and sustainable.

Perceived fairness of revenue management in the US golf industry

Experience in other industries has shown that revenue management can increase revenue without affecting customer satisfaction. Revenue management, however, is underutilised in the golf industry, as customers are believed to perceive such practices as unacceptable and unfair. This paper explores six revenue management practices that might be suitable in a golf context and examines their perceived fairness. The results show that golfers perceive arrival duration control practices in the form of reservation fees or no-show fees as fair. In addition, it was found that golfers perceive demand-based pricing in the form of coupons (two for the price of one), time-of-day and reduced tee time intervals as fair. Conversely, time-of-booking pricing was perceived as neutral to slightly unfair. Varying price levels were seen as unfair, with potential negative consumer reactions to this practice. Furthermore, the paper explores whether framing demand-based pricing as discounts rather than surcharges would make a difference. It was found that demand-based pricing presented as discounts were generally seen as fairer and therefore less likely to have a negative impact on consumer perceptions and reactions.

Decision Making in a Standby Service System

A standby service option allows a firm to lower its risk of not having sufficient capacity to satisfy demand without investing in additional capacity. Standby service options currently exist in the natural gas, electric, and water utility industries. Firms seeking standby service are typically large industrial or institutional organizations that, due to unexpectedly high demand or interruptions in their own supply system, look to a public utility to supplement their requirements. Typically, the firm pays the utility a reservation fee based on a nominated volume and a consumption charge based on the volume actually taken. In this paper, a single-period model is developed and optimized with respect to the amount of standby capacity a firm should reserve. Expressions for the mean and variance of the supplier's aggregate standby demand distribution are developed. A procedure for computing the level of capacity needed to safely meet its standby obligations is presented. Numerical results suggest that the standby supplier can safely meet its standby demand with a capacity that is generally between 20 to 50% of the aggregate nominated volume.