Revenue Management for e-Services: Joint Optimization of Price and Service Levels

This paper presents a framework for revenue management in on-demand e-services, such as e-business hosting, e-services, software as service, capacity on demand, etc. A critical component of the framework presented here is that price segmentation and quality-of-service segmentation are performed jointly. As is often the case in the revenue management literature, the relation between demand modeling and price segmentation is captured explicitly. However, unlike much of the revenue management literature, the relation between number of customers served and the quality-of-service level offered is also explicitly modeled, in this case through queueing relations. The framework presented here therefore involves models of customer behavior, customer servicing and resource allocation. We argue that extending revenue management models beyond dynamic pricing to include other, related, decisions facing a business is critical operating profitably in an on-demand market of e-services.

By: Parijat Dube; Tieming Liu; Laura Wynter

Published in: RC23984 in 2006


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