IDEAS home Printed from https://ideas.repec.org/a/eee/ejores/v245y2015i2p470-479.html
   My bibliography  Save this article

Capacity reservation for time-sensitive service providers: An application in seaport management

Author

Listed:
  • Jeff Hong, L.
  • Xu, Xiaowei
  • Zhang, Sheng Hao

Abstract

This paper analyzes a capacity management problem in which two service providers utilize a common facility to serve two separate markets with time-sensitive demands. The facility provider has a fixed capacity and all parties maximize demand rates. When the service providers share the facility, they play a frequency competition game with a unique Nash equilibrium. When the service providers have dedicated facilities, the facility provider leads two separate Stackelberg games. A centralized system with the first-best outcome is also examined. Based on closed-form solutions under all three scenarios, we find that facility capacity competition is a prerequisite condition for not pooling the service providers. Moreover, we establish the rankings of preferred strategies for all parties with respect to the ratio of the service providers’ demand loss rates, which are proportional to the time sensitivity of demand and the potential market size. Interestingly a triple-agreement situation for the pooling strategy exists if the rates are close, and the facility provider permits a request for dedicated facilities only if the service provider has an overwhelming dominance at the demand loss rate. We connect these managerial insights with strategic seaport capacity management.

Suggested Citation

  • Jeff Hong, L. & Xu, Xiaowei & Zhang, Sheng Hao, 2015. "Capacity reservation for time-sensitive service providers: An application in seaport management," European Journal of Operational Research, Elsevier, vol. 245(2), pages 470-479.
  • Handle: RePEc:eee:ejores:v:245:y:2015:i:2:p:470-479
    DOI: 10.1016/j.ejor.2015.03.027
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S0377221715002349
    Download Restriction: Full text for ScienceDirect subscribers only

    File URL: https://libkey.io/10.1016/j.ejor.2015.03.027?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Pangburn, Michael S. & Stavrulaki, Euthemia, 2008. "Capacity and price setting for dispersed, time-sensitive customer segments," European Journal of Operational Research, Elsevier, vol. 184(3), pages 1100-1121, February.
    2. Kut C. So, 2000. "Price and Time Competition for Service Delivery," Manufacturing & Service Operations Management, INFORMS, vol. 2(4), pages 392-409, April.
    3. Armony, Mor & Haviv, Moshe, 2003. "Price and delay competition between two service providers," European Journal of Operational Research, Elsevier, vol. 147(1), pages 32-50, May.
    4. Michael H. Rothkopf & Paul Rech, 1987. "Perspectives on Queues: Combining Queues is Not Always Beneficial," Operations Research, INFORMS, vol. 35(6), pages 906-909, December.
    5. Gad Allon & Awi Federgruen, 2008. "Service Competition with General Queueing Facilities," Operations Research, INFORMS, vol. 56(4), pages 827-849, August.
    6. Moshe Haviv & Ya'acov Ritov, 1998. "Externalities, Tangible Externalities, and Queue Disciplines," Management Science, INFORMS, vol. 44(6), pages 850-858, June.
    7. Ehud Kalai & Morton I. Kamien & Michael Rubinovitch, 1992. "Optimal Service Speeds in a Competitive Environment," Management Science, INFORMS, vol. 38(8), pages 1154-1163, August.
    8. van Dijk, Nico & van der Sluis, Erik, 2009. "Pooling is not the answer," European Journal of Operational Research, Elsevier, vol. 197(1), pages 415-421, August.
    9. Sinha, Sudhir K. & Rangaraj, N. & Hemachandra, N., 2010. "Pricing surplus server capacity for mean waiting time sensitive customers," European Journal of Operational Research, Elsevier, vol. 205(1), pages 159-171, August.
    10. Mandjes, Michel & Timmer, Judith, 2007. "A duopoly model with heterogeneous congestion-sensitive customers," European Journal of Operational Research, Elsevier, vol. 176(1), pages 445-467, January.
    11. Vikrant Vaze & Cynthia Barnhart, 2012. "Modeling Airline Frequency Competition for Airport Congestion Mitigation," Transportation Science, INFORMS, vol. 46(4), pages 512-535, November.
    12. Albert Y. Ha, 1998. "Incentive-Compatible Pricing for a Service Facility with Joint Production and Congestion Externalities," Management Science, INFORMS, vol. 44(12-Part-1), pages 1623-1636, December.
    13. Adler, Nicole, 2001. "Competition in a deregulated air transportation market," European Journal of Operational Research, Elsevier, vol. 129(2), pages 337-345, March.
    14. Ward Whitt, 1999. "Partitioning Customers into Service Groups," Management Science, INFORMS, vol. 45(11), pages 1579-1592, November.
    15. Meng, Qiang & Wang, Shuaian, 2011. "Optimal operating strategy for a long-haul liner service route," European Journal of Operational Research, Elsevier, vol. 215(1), pages 105-114, November.
    16. Yimin Yu & Saif Benjaafar & Yigal Gerchak, 2015. "Capacity Sharing and Cost Allocation among Independent Firms with Congestion," Production and Operations Management, Production and Operations Management Society, vol. 24(8), pages 1285-1310, August.
    17. Ray, Saibal & Jewkes, E. M., 2004. "Customer lead time management when both demand and price are lead time sensitive," European Journal of Operational Research, Elsevier, vol. 153(3), pages 769-781, March.
    18. Tamer Boyaci & Saibal Ray, 2003. "Product Differentiation and Capacity Cost Interaction in Time and Price Sensitive Markets," Manufacturing & Service Operations Management, INFORMS, vol. 5(1), pages 18-36, May.
    19. Osorio, Carolina & Bierlaire, Michel, 2009. "An analytic finite capacity queueing network model capturing the propagation of congestion and blocking," European Journal of Operational Research, Elsevier, vol. 196(3), pages 996-1007, August.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Nur Sunar & Yichen Tu & Serhan Ziya, 2021. "Pooled vs. Dedicated Queues when Customers Are Delay-Sensitive," Management Science, INFORMS, vol. 67(6), pages 3785-3802, June.
    2. Xiangyu Luo & Rui Qiu, 2020. "Electric Vehicle Charging Station Location towards Sustainable Cities," IJERPH, MDPI, vol. 17(8), pages 1-22, April.
    3. Jianpei Wen & Hanyu Jiang & Jie Song, 2019. "A Stochastic Queueing Model for Capacity Allocation in the Hierarchical Healthcare Delivery System," Asia-Pacific Journal of Operational Research (APJOR), World Scientific Publishing Co. Pte. Ltd., vol. 36(01), pages 1-24, February.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Huang, Yeu-Shiang & Chen, Si-Hen & Ho, Jyh-Wen, 2013. "A study on pricing and delivery strategy for e-retailing systems," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 59(C), pages 71-84.
    2. Gu, Wei & Heese, H. Sebastian & Kemahlıoğlu-Ziya, Eda & Ziya, Serhan, 2024. "Pricing for services with cross-segment externalities, capacity constraints, and competition," European Journal of Operational Research, Elsevier, vol. 313(2), pages 801-813.
    3. Hongyan Li & Joern Meissner, 2018. "Capacity optimization and competition with cyclical and lead-time-dependent demands," Annals of Operations Research, Springer, vol. 271(2), pages 737-763, December.
    4. Yang, Yang & Liu, Jie & Hu, Taizhong, 2023. "Capital allocation and pricing decisions under trade credit with time-sensitive stochastic demand," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 173(C).
    5. Hammami, Ramzi & Frein, Yannick & Nouira, Imen & Albana, Abduh-Sayid, 2022. "On the interplay between local lead times, overall lead time, prices, and profits in decentralized supply chains," International Journal of Production Economics, Elsevier, vol. 243(C).
    6. Jayaswal, Sachin & Jewkes, Elizabeth & Ray, Saibal, 2011. "Product differentiation and operations strategy in a capacitated environment," European Journal of Operational Research, Elsevier, vol. 210(3), pages 716-728, May.
    7. Jayaswal, Sachin, 2014. "Priority Service System Optimization under Service Level Constraints," IIMA Working Papers WP2014-08-04, Indian Institute of Management Ahmedabad, Research and Publication Department.
    8. Abhijit Upasani & Reha Uzsoy, 2008. "Incorporating manufacturing lead times in joint production-marketing models: A review and some future directions," Annals of Operations Research, Springer, vol. 161(1), pages 171-188, July.
    9. Weixin Shang & Liming Liu, 2011. "Promised Delivery Time and Capacity Games in Time-Based Competition," Management Science, INFORMS, vol. 57(3), pages 599-610, March.
    10. Anthony M. Kwasnica & Euthemia Stavrulaki, 2008. "Competitive location and capacity decisions for firms serving time‐sensitive customers," Naval Research Logistics (NRL), John Wiley & Sons, vol. 55(7), pages 704-721, October.
    11. Jalili Marand, Ata & Li, Hongyan & Thorstenson, Anders, 2019. "Joint inventory control and pricing in a service-inventory system," International Journal of Production Economics, Elsevier, vol. 209(C), pages 78-91.
    12. Qian, Li, 2014. "Market-based supplier selection with price, delivery time, and service level dependent demand," International Journal of Production Economics, Elsevier, vol. 147(PC), pages 697-706.
    13. Zhao, Jing & Zhang, Qin, 2021. "The effect of contract methods on the lead time of a two-level photovoltaic supply chain: revenue-sharing vs. cost-sharing," Energy, Elsevier, vol. 231(C).
    14. Zhu, Stuart X., 2015. "Integration of capacity, pricing, and lead-time decisions in a decentralized supply chain," International Journal of Production Economics, Elsevier, vol. 164(C), pages 14-23.
    15. Gad Allon & Awi Federgruen, 2008. "Service Competition with General Queueing Facilities," Operations Research, INFORMS, vol. 56(4), pages 827-849, August.
    16. Jain, Aditya & Bala, Ram, 2018. "Differentiated or integrated: Capacity and service level choice for differentiated products," European Journal of Operational Research, Elsevier, vol. 266(3), pages 1025-1037.
    17. Gregory Dobson & Euthemia Stavrulaki, 2007. "Simultaneous price, location, and capacity decisions on a line of time‐sensitive customers," Naval Research Logistics (NRL), John Wiley & Sons, vol. 54(1), pages 1-10, February.
    18. Sharafali, Moosa & Tarakci, Hakan & Kulkarni, Shailesh & Razack Shahul Hameed, Raja Abdul, 2019. "Optimal delivery due date for a supplier with an unreliable machine under outsourced maintenance," International Journal of Production Economics, Elsevier, vol. 208(C), pages 53-68.
    19. Urban, Timothy L., 2009. "Establishing delivery guarantee policies," European Journal of Operational Research, Elsevier, vol. 196(3), pages 959-967, August.
    20. Mor Armony & Guillaume Roels & Hummy Song, 2021. "Pooling Queues with Strategic Servers: The Effects of Customer Ownership," Operations Research, INFORMS, vol. 69(1), pages 13-29, January.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eee:ejores:v:245:y:2015:i:2:p:470-479. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Catherine Liu (email available below). General contact details of provider: http://www.elsevier.com/locate/eor .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.