Static Pricing: Universal Guarantees for Reusable Resources
Omar Besbes, Adam N. Elmachtoub, Yunjie Sun

TL;DR
This paper analyzes static pricing strategies for reusable resources, proving they guarantee a significant fraction of the optimal profit, market share, and service level across various settings, including cloud and shared vehicle markets.
Contribution
It provides the first theoretical guarantees for static pricing policies in reusable resource markets, showing they achieve at least 78.9% of optimal performance under general conditions.
Findings
Static pricing guarantees 78.9% of optimal profit, market share, and service level.
For two units with linear demand, static pricing guarantees 95.5% of profit.
Numerical results support the robustness of static pricing performance.
Abstract
We consider a fundamental pricing model in which a fixed number of units of a reusable resource are used to serve customers. Customers arrive to the system according to a stochastic process and upon arrival decide whether or not to purchase the service, depending on their willingness-to-pay and the current price. The service time during which the resource is used by the customer is stochastic and the firm may incur a service cost. This model represents various markets for reusable resources such as cloud computing, shared vehicles, rotable parts, and hotel rooms. In the present paper, we analyze this pricing problem when the firm attempts to maximize a weighted combination of three central metrics: profit, market share, and service level. Under Poisson arrivals, exponential service times, and standard assumptions on the willingness-to-pay distribution, we establish a series of results…
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Taxonomy
TopicsTransportation and Mobility Innovations · Supply Chain and Inventory Management · Advanced Queuing Theory Analysis
