Optimal Service Speeds in a Competitive Environment
This is a study of the economic behavior of vendors of service in competition. A simple model with two competing exponential servers and Poisson arrivals is considered. Each server is free to choose his own service rate at a cost (per time unit) that is strictly convex and increasing. There is a fix...
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| Veröffentlicht in: | Management science 1992-08, Vol.38 (8), p.1154-1163 |
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| creator | Kalai, Ehud Kamien, Morton I Rubinovitch, Michael |
| description | This is a study of the economic behavior of vendors of service in competition. A simple model with two competing exponential servers and Poisson arrivals is considered. Each server is free to choose his own service rate at a cost (per time unit) that is strictly convex and increasing. There is a fixed reward to a server for each customer that he serves. The model is designed to study one specific aspect of competition, namely, competition in speed of service as a means for capturing a larger market share in order to maximize long-run expected profit per time unit. A two-person strategic game is formulated and its solutions are characterized. Depending on the revenue per customer served and on the cost of maintaining service rates, the following three situations may arise: (i) a unique symmetric strategic (Nash) equilibrium in which expected waiting time is infinite; (ii) a unique symmetric strategic equilibrium in which expected waiting time is finite; and (iii) several, nonsymmetric strategic equilibria with infinite expected waiting time. An explicit expression for the market share of each server as a function of the service rates of the two servers is also given. |
| doi_str_mv | 10.1287/mnsc.38.8.1154 |
| format | Article |
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A simple model with two competing exponential servers and Poisson arrivals is considered. Each server is free to choose his own service rate at a cost (per time unit) that is strictly convex and increasing. There is a fixed reward to a server for each customer that he serves. The model is designed to study one specific aspect of competition, namely, competition in speed of service as a means for capturing a larger market share in order to maximize long-run expected profit per time unit. A two-person strategic game is formulated and its solutions are characterized. Depending on the revenue per customer served and on the cost of maintaining service rates, the following three situations may arise: (i) a unique symmetric strategic (Nash) equilibrium in which expected waiting time is infinite; (ii) a unique symmetric strategic equilibrium in which expected waiting time is finite; and (iii) several, nonsymmetric strategic equilibria with infinite expected waiting time. An explicit expression for the market share of each server as a function of the service rates of the two servers is also given.</description><identifier>ISSN: 0025-1909</identifier><identifier>EISSN: 1526-5501</identifier><identifier>DOI: 10.1287/mnsc.38.8.1154</identifier><identifier>CODEN: MSCIAM</identifier><language>eng</language><publisher>Linthicum, MD: INFORMS</publisher><subject>Applied sciences ; Competition ; competition between servers ; Competitiveness ; Customer services ; Economic competition ; Educational administration ; Exact sciences and technology ; Management science ; Marginal costs ; Market competition ; Market share ; Market shares ; Marketing strategies ; Mathematical models ; Nash equilibrium ; Network servers ; Operational research and scientific management ; Operational research. Management science ; Optimal ; Profit per unit ; Queuing theory ; Queuing theory. Traffic theory ; Revenue ; Servers ; Studies ; two-server queues</subject><ispartof>Management science, 1992-08, Vol.38 (8), p.1154-1163</ispartof><rights>Copyright 1992 The Institute of Management Sciences</rights><rights>1992 INIST-CNRS</rights><rights>Copyright Institute for Operations Research and the Management Sciences Aug 1992</rights><lds50>peer_reviewed</lds50><oa>free_for_read</oa><woscitedreferencessubscribed>false</woscitedreferencessubscribed><citedby>FETCH-LOGICAL-c582t-26bd868d26a8a4f87299609664a6ee5d343b040503e1d1156cc8da8866d43f1d3</citedby></display><links><openurl>$$Topenurl_article</openurl><openurlfulltext>$$Topenurlfull_article</openurlfulltext><thumbnail>$$Tsyndetics_thumb_exl</thumbnail><linktopdf>$$Uhttps://www.jstor.org/stable/pdf/2632623$$EPDF$$P50$$Gjstor$$H</linktopdf><linktohtml>$$Uhttps://pubsonline.informs.org/doi/full/10.1287/mnsc.38.8.1154$$EHTML$$P50$$Ginforms$$H</linktohtml><link.rule.ids>314,776,780,799,3679,3994,27846,27901,27902,57992,58225,62589</link.rule.ids><backlink>$$Uhttp://pascal-francis.inist.fr/vibad/index.php?action=getRecordDetail&idt=5462899$$DView record in Pascal Francis$$Hfree_for_read</backlink><backlink>$$Uhttp://econpapers.repec.org/article/inmormnsc/v_3a38_3ay_3a1992_3ai_3a8_3ap_3a1154-1163.htm$$DView record in RePEc$$Hfree_for_read</backlink></links><search><creatorcontrib>Kalai, Ehud</creatorcontrib><creatorcontrib>Kamien, Morton I</creatorcontrib><creatorcontrib>Rubinovitch, Michael</creatorcontrib><title>Optimal Service Speeds in a Competitive Environment</title><title>Management science</title><description>This is a study of the economic behavior of vendors of service in competition. A simple model with two competing exponential servers and Poisson arrivals is considered. Each server is free to choose his own service rate at a cost (per time unit) that is strictly convex and increasing. There is a fixed reward to a server for each customer that he serves. The model is designed to study one specific aspect of competition, namely, competition in speed of service as a means for capturing a larger market share in order to maximize long-run expected profit per time unit. A two-person strategic game is formulated and its solutions are characterized. Depending on the revenue per customer served and on the cost of maintaining service rates, the following three situations may arise: (i) a unique symmetric strategic (Nash) equilibrium in which expected waiting time is infinite; (ii) a unique symmetric strategic equilibrium in which expected waiting time is finite; and (iii) several, nonsymmetric strategic equilibria with infinite expected waiting time. An explicit expression for the market share of each server as a function of the service rates of the two servers is also given.</description><subject>Applied sciences</subject><subject>Competition</subject><subject>competition between servers</subject><subject>Competitiveness</subject><subject>Customer services</subject><subject>Economic competition</subject><subject>Educational administration</subject><subject>Exact sciences and technology</subject><subject>Management science</subject><subject>Marginal costs</subject><subject>Market competition</subject><subject>Market share</subject><subject>Market shares</subject><subject>Marketing strategies</subject><subject>Mathematical models</subject><subject>Nash equilibrium</subject><subject>Network servers</subject><subject>Operational research and scientific management</subject><subject>Operational research. Management science</subject><subject>Optimal</subject><subject>Profit per unit</subject><subject>Queuing theory</subject><subject>Queuing theory. 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A simple model with two competing exponential servers and Poisson arrivals is considered. Each server is free to choose his own service rate at a cost (per time unit) that is strictly convex and increasing. There is a fixed reward to a server for each customer that he serves. The model is designed to study one specific aspect of competition, namely, competition in speed of service as a means for capturing a larger market share in order to maximize long-run expected profit per time unit. A two-person strategic game is formulated and its solutions are characterized. Depending on the revenue per customer served and on the cost of maintaining service rates, the following three situations may arise: (i) a unique symmetric strategic (Nash) equilibrium in which expected waiting time is infinite; (ii) a unique symmetric strategic equilibrium in which expected waiting time is finite; and (iii) several, nonsymmetric strategic equilibria with infinite expected waiting time. An explicit expression for the market share of each server as a function of the service rates of the two servers is also given.</abstract><cop>Linthicum, MD</cop><pub>INFORMS</pub><doi>10.1287/mnsc.38.8.1154</doi><tpages>10</tpages><oa>free_for_read</oa></addata></record> |
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| ispartof | Management science, 1992-08, Vol.38 (8), p.1154-1163 |
| issn | 0025-1909 1526-5501 |
| language | eng |
| recordid | cdi_proquest_journals_1297799887 |
| source | Jstor Complete Legacy; RePEc; INFORMS PubsOnLine; Periodicals Index Online; EBSCOhost Business Source Complete |
| subjects | Applied sciences Competition competition between servers Competitiveness Customer services Economic competition Educational administration Exact sciences and technology Management science Marginal costs Market competition Market share Market shares Marketing strategies Mathematical models Nash equilibrium Network servers Operational research and scientific management Operational research. Management science Optimal Profit per unit Queuing theory Queuing theory. Traffic theory Revenue Servers Studies two-server queues |
| title | Optimal Service Speeds in a Competitive Environment |
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