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Pricing policies for services by facilities with Weibull lifetimes

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Listed:
  • Yi-Fang Lin
  • Ruey Huei Yeh
  • Hsiu-Chen Lin
  • Gino K. Yang
  • Chyn-Yng Yang

Abstract

To make good profits, pricing is a competitive weapon of service firms. This paper is concerned with pricing strategies for services with substantial facility maintenance costs. To address the problem, a mathematical framework that incorporates service demand and facility deterioration is proposed. The facility and customers constitute a service system driven by Poisson arrivals and exponential service times. The most common log-linear customer demand and Weibull-distributed facility lifetime are also adopted. By examining the linkage between customer demand and facility deterioration in profit model, pricing policies of the service are investigated. Then analytical conditions of customer demand and facility lifetime are derived to achieve a unique optimal pricing policy. Finally, numerical examples are presented to illustrate the effects of parameter variations on the optimal pricing policy.

Suggested Citation

  • Yi-Fang Lin & Ruey Huei Yeh & Hsiu-Chen Lin & Gino K. Yang & Chyn-Yng Yang, 2013. "Pricing policies for services by facilities with Weibull lifetimes," The Service Industries Journal, Taylor & Francis Journals, vol. 33(2), pages 218-235, February.
    • Handle: RePEc:taf:servic:v:33:y:2013:i:2:p:218-235
    DOI: 10.1080/02642069.2011.613935
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    Cited by:

    1. Hui-Chih Hung & Chung-Yu Chung & Muh-Cherng Wu & Wan-Ling Shen, 2017. "A membership pricing policy to facilitate service scale-expansion," The Service Industries Journal, Taylor & Francis Journals, vol. 37(3-4), pages 167-189, March.

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