Pricing with Informative Delay Announcements
Sırma Karakaya
Department of Industrial Engineering, METU

Abstract
We study the pricing problem of a service provider who makes delay announcements to inform the customers about anticipated delays. Besides making price quotes to arriving customers, the provider decides on the amount of delay information to be revealed with to the customers. Price and announcement decisions affect the behavior of the customers who are delay and price sensitive, which in turn affects the profitability of the firm. We model the system as a stochastic discrete-time Markovian queue, and model the pricing problems through Markov decision process. We compare several delay information and pricing schemes and through analytical results and numerical study identify the conditions that make specific delay information or pricing schemes more preferable. We also analyze the impact of the information asymmetry on the preference of the provider. We consider pricing schemes with varying levels of flexibility, and our findings show that even if the information asymmetry favors the service provider, the delay information scheme might severely curb the benefit of the pricing flexibility. Furthermore, results show that traffic intensity, customer-sensitivity and precision of the price quotes have a significant impact on selecting the delay information scheme.

Short Bio
Sırma Karakaya is a Ph.D. student in Industrial Engineering at METU. Her B.S. and M.S. degrees are in Industrial Engineering from Bilkent University and METU, respectively. Currently she is working as a research assistant at TEDU.

Venue
Friday, November 17, 2017 at 4.00 pm in IE03