Strategic Revenue Management of Preemptive versus Non-Preemptive Queues

TL;DR

This paper compares revenue strategies in two-class priority queues, demonstrating that preemptive policies always outperform non-preemptive ones and that optimal revenue may involve partial premium class enrollment.

Contribution

It provides a novel analysis showing the superiority of preemptive policies and the conditions for optimal partial premium enrollment in strategic queue management.

Findings

Preemptive policy always yields higher maximum revenue.

Maximum revenue under preemptive policy can be achieved with partial premium class enrollment.

Strategic customer behavior impacts optimal revenue strategies.

Abstract

Consider a two-class unobservable priority queue, with Poisson arrivals, generally distributed service, and strategic customers. Customers are charged a fee when joining the premium class. We analyze the maximum revenue achievable under the non-preemptive (NP) and preemptive-resume (PR) policies, and show that a provider is always better off implementing the PR policy. Further, the maximum revenue under PR is sometimes achieved when only a fraction of the customers join the premium class.