Revenue optimization for a make-to-order queue in an uncertain market environment. (English) Zbl 1233.90111

Besbes, Omar; Maglaras, Costis

Oper. Res. 57, No. 6, 1438-1450 (2009).

Summary: We consider a revenue-maximizing make-to-order manufacturer that serves a market of price- and delay-sensitive customers and operates in an environment in which the market size varies stochastically over time. A key feature of our analysis is that no model is assumed for the evolution of the market size. We analyze two main settings: (i) the size of the market is observable at any point in time; and (ii) the size of the market is not observable and hence cannot be used for decision making. We focus on high-volume systems that are characterized by large processing capacities and market sizes, and where the latter fluctuate on a slower timescale than that of the underlying production system dynamics. We develop an approach to tackle such problems that is based on an asymptotic analysis and that yields near-optimal policy recommendations for the original system via the solution of a stochastic fluid model.

MSC:

90B22	Queues and service in operations research
91B70	Stochastic models in economics

Keywords:

revenue management; dynamic pricing; market uncertainty; queueing; state-dependent queues; asymptotic analysis