Capacity management: Pricing strategy, performance and the role of information

A queueing model is used to analyse the interrelation between system performance, pricing strategy and information. Two input control methods are studied: a club approach (controlling the expected arrival rate) and a free-entry system (controlling the maximum backlog), where a new customer may or may not be able to observe the existing backlog. The club approach generally leads to higher prices, lower utilization and lower profit. Under the free-entry system, customers are better off if they can observe the backlog, but society as a whole is worse off. If there is a shortage of customers, the club approach becomes more attractive, as customers must pre-commit.