Firms in many industries are capacity-constrained and face delay-sensitive customers who are willing to pay more for faster service. I will discuss some of my work on the problem of designing revenue-maximizing pricing and service policies in such environments.
My talk will focus on the question of incentive-compatible price and service differentiation: How to design a static price/lead-time menu, and a corresponding scheduling policy, to maximize revenues from heterogeneous customers with private information on their attributes?
I will start with a brief review of the case where customers have unit demand (, , ). In this case, delay cost heterogeneity is the key driver of the optimal policy. I will then discuss work on the case where customers have demand on multiple occasions (). We assume customers do not differ in their delay costs. Yet we show that priority service may be optimal as a result of demand rate heterogeneity.
Time permitting I will conclude by outlining some underexplored demand characteristics that point to future directions for research on the design of pricing and service policies.
 Afèche, P., H. Mendelson. 2004. Pricing and priority auctions in queueing systems with a generalized delay cost structure. Management Science, 50, 869-882.
 Afèche, P. 2013. Incentive-compatible revenue management in queueing systems: optimal strategic delay. Manufacturing & Service Operations Management, 15, 423-443.
 Afèche, P., M. Pavlin. 2015. Optimal price/lead-time menus for queues with customer choice: segmentation, pooling, strategic delay. Forthcoming in Management Science.
 Afèche, P., O. Baron, J.Milner, R.Roet-Green. 2015. Pricing and prioritizing time-sensitive customers with heterogeneous demand rates. Under revision for Operations Research.