Static and Dynamic Pricing of Excess Capacity in a Make-to-Order Environment
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Citations
A competitive dynamic pricing model when demand is interdependent over time
Single‐Period Two‐Product Assemble‐to‐Order Systems with a Common Component and Uncertain Demand Patterns
How much to tell your customer? – A survey of three perspectives on selling strategies with incompletely specified products
Dynamic pricing with uncertain production cost: An alternating-move approach
A Dynamic Pricing Model for Coordinated Sales and Operations
References
Elements of information theory
Fundamentals of queueing theory
Dynamic Version of the Economic Lot Size Model
DYNAMIC VERSION OF THE ECONOMIC LOT SIZE MODEL*t
Dynamic Programming: Deterministic and Stochastic Models
Related Papers (5)
Frequently Asked Questions (12)
Q2. What is the arrival rate for fill-in customers?
the arrival rate for fill-in customers depends on the prices charged via a downward sloping demand function, ( )ff pλ , where fp is the price charged for fill-in customers.
Q3. What is the way to avoid the state of the factory?
From a managerial standpoint, if the factory is very lightly loaded or customers are relatively insensitive to delays, it is best to ignore the state of the factory in deciding which jobs to accept – only price should be used to discourage or encourage customers.
Q4. How much is the expected revenue due to the fill-in jobs?
The probability that this system is idle is approximately 0.0603, and thus the expected additional revenue due to the fill-in jobs is approximately $1073 per month.
Q5. How much does the expected performance of this pricing scheme exceed that of state-dependent pricing?
It is interesting to note that the expected performance of this relatively simple form of state-dependent pricing exceeds that of state-independent pricing by approximately 8.4% in this example.
Q6. What is the optimal pricing for fill-in jobs?
Of note in Theorem 3 is that for a non-binding waiting time constraint, it is optimal to use state-independent pricing for fill-in jobs.
Q7. What is the reason for the effect of admitting jobs only when idle?
The explanation for this effect is that admitting jobs only when idle gets costly for a lightly loaded system; such a policy does not allow any queueing of fill-in jobs, which can result in unnecessary idle time.
Q8. What is the way to determine the optimal price for fill-in jobs?
In this subsection the authors study a general state-dependent pricing scheme in which price maybe changed dynamically without constraint, i.e., fill-in job arrivals at time t are charged a price that is a function of the congestion levels in time t.
Q9. What is the parallel picture in the grocery industry?
A parallel picture in the grocery industry is the emergence of loyalty cards where “loyal” (or long-term) customers are promised better deals than “walk-in” customers who have to pay the price they face during that week.
Q10. what is the expected waiting time in the system for core arrivals?
The expected waiting time in the system for core arrivals is given by:( ) ( ) +∏ ++= ∑ ∞=− =1100 11 iifjcij c iW µλλµ π.
Q11. How many fill-in jobs can a company complete per month?
Example 4. Following Examples 1-3, fill-in customers exhibit demand of the form ( ) ppf 1.0100 −=λ ; core customers arrive at an average rate of 8 per month and the production system can complete 10 jobs per month on average.
Q12. What is the expected waiting time in the system for core customers?
The expected waiting time in the system for core customer arrivals is given by:( ) ( ) − + − + +=µ λ µ λµλλ µ π cc fc cW1111 12 0 .