Service Mechanism and Pricing Based on Fairness Preference of Customers in Queuing System
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Journal of Systems Science and Information  2018, Vol. 6 Issue (6): 481-494    DOI: 10.21078/JSSI-2018-481-14
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Service Mechanism and Pricing Based on Fairness Preference of Customers in Queuing System
Yong XU1, Jian LIU1, Baomei MA2, Shuai ZHANG1
1. School of Economics and Management, Nanjing University of Science and Technology, Nanjing 210094, China;
2. School of Economics and Management, Nanjing University of Aeronautics and Astronautics, Nanjing 211106, China
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Abstract 

Service providers often adopt the mechanism of customer classification due to the heterogeneity of customer waiting cost. However, the classification service may cause unfairness feeling of regular customers, then affect the revenue and social welfare. This paper provides the first exact analysis about the situation that service providers offer two classes of non-preemptive priority service when customer fairness perception is explicitly modeled. We model customer fairness perception as a negative utility on regular customers that's proportional to the waiting time difference between the two queues. By analyzing a stylized M/M/1 queue in monopoly service system, we can derive important results some of which reaffirm existed research results. First, from the perspective of revenue maximization, service providers should adopt the mechanism of customer classification and set up the two kinds of customers where they can see each other. Next, considering customer utility maximization, service providers should cancel the mechanism of customer classification, and keep one queue (regular customers) only. Then, from the perspective of social welfare maximization, service providers should also adopt the mechanism of customer classification but set up the two kinds of customers where they cannot feel each other. Finally, this paper concludes the optimal pricing based on customer classification in the above three different perspectives. This research shows important reference value and practical significance for service providers who adopt the mechanism of classification service.

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Yong XU
Jian LIU
Baomei MA
Shuai ZHANG
Key wordsservice operation   fairness preference   revenue   utility   social welfare   optimization     
Received: 2018-09-07;
Fund:

Supported by the National Natural Science Foundation of China (71671092, 71301075), the Postdoctoral Science Foundation Funded Project of Jiangsu Province, China (1501040A), National Key Research and Development Program: Key Projects of International Scientific and Technological Innovation Cooperation Between Governments (2016YFE0108000)

Cite this article:   
Yong XU,Jian LIU,Baomei MA et al. Service Mechanism and Pricing Based on Fairness Preference of Customers in Queuing System[J]. Journal of Systems Science and Information, 2018, 6(6): 481-494.
URL:  
http://123.57.41.99/Jwk_si/EN/10.21078/JSSI-2018-481-14     or     http://123.57.41.99/Jwk_si/EN/Y2018/V6/I6/481
 
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