Capacity Management in Rental Businesses With Two Customer Bases

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dc.contributor.authorSavin, Sergei
dc.contributor.authorCohen, Morris A
dc.contributor.authorGans, Noah
dc.contributor.authorKatalan, Ziv
dc.date2023-05-17T15:14:17.000
dc.date.accessioned2023-05-23T00:17:13Z
dc.date.available2023-05-23T00:17:13Z
dc.date.issued2005-07-01
dc.date.submitted2016-07-22T09:31:08-07:00
dc.description.abstractWe consider the allocation of capacity in a system in which rental equipment is accessed by two classes of customers. We formulate the problem as a continuous-time analogue of the one-shot allocation problems found in the more traditional literature on revenue management, and we analyze a queueing control model that approximates its dynamics. Our investigation yields three sets of results. First, we use dynamic programming to characterize properties of optimal capacity allocation policies. We identify conditions under which “complete sharing”—in which both classes of customers have unlimited access to the rental fleet—is optimal. Next, we develop a computationally efficient “aggregate threshold” heuristic that is based on a fluid approximation of the original stochastic model. We obtain closed-form expressions for the heuristic’s control parameters and show that the heuristic performs well in numerical experiments. The closed-form expressions also show that, in the context of the fluid approximation, revenues are concave and increasing in the fleet size. Finally, we consider the effect of the ability to allocate capacity on optimal fleet size. We show that the optimal fleet size under allocation policies may be lower, the same as, or higher than that under complete sharing. As capacity costs increase, allocation policies allow for larger relative fleet sizes. Numerical results show that, even in cases in which dollar profits under complete sharing may be close to those under allocation policies, the capacity reductions enabled by allocation schemes can help to lift profit margins significantly.
dc.identifier.urihttps://repository.upenn.edu/handle/20.500.14332/42292
dc.legacy.articleid1211
dc.legacy.fields10.1287/opre.1040.0193
dc.legacy.fulltexturlhttps://repository.upenn.edu/cgi/viewcontent.cgi?article=1211&context=oid_papers&unstamped=1
dc.source.beginpage617
dc.source.endpage631
dc.source.issue98
dc.source.issue4
dc.source.journalOperations, Information and Decisions Papers
dc.source.journaltitleOperation Research
dc.source.peerreviewedtrue
dc.source.statuspublished
dc.source.volume53
dc.subject.otherservice systems
dc.subject.otherqueueing control
dc.subject.otherstochastic knapsack
dc.subject.otherfluid models
dc.subject.otherOther Computer Engineering
dc.subject.otherProgramming Languages and Compilers
dc.titleCapacity Management in Rental Businesses With Two Customer Bases
dc.typeArticle
digcom.identifieroid_papers/98
digcom.identifier.contextkey8868216
digcom.identifier.submissionpathoid_papers/98
digcom.typearticle
dspace.entity.typePublication
upenn.schoolDepartmentCenterOperations, Information and Decisions Papers
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