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Coordination of staffing and pricing decisions in a service firm
Author(s) -
Serel Doǧan A.,
Erel Erdal
Publication year - 2008
Publication title -
applied stochastic models in business and industry
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.413
H-Index - 40
eISSN - 1526-4025
pISSN - 1524-1904
DOI - 10.1002/asmb.708
Subject(s) - staffing , profit maximization , queueing theory , service (business) , computer science , operations research , profit (economics) , constraint (computer aided design) , microeconomics , variable (mathematics) , convexity , mathematical optimization , economics , business , mathematics , computer network , marketing , finance , geometry , management , mathematical analysis
Customer demand is sensitive to the price paid for the service in many service environments. Using queueing theory framework, we develop profit maximization models for jointly determining the price and the staffing level in a service company. The models include constraints on the average waiting time and the blocking probability. We show convexity of the single‐variable subproblem under certain plausible assumptions on the demand and staffing cost functions. Using numerical examples, we investigate the sensitivity of the price and the staffing level to changes in the marginal service cost and the user‐specified constraint on the congestion measure. Copyright © 2008 John Wiley & Sons, Ltd.