Flexible Service Capacity – Optimal Investment and the Impact of Demand Correlation

Jul 29th, 2002 by Tony in * papers

Also in the Mar/Apr issue of Operations Research is an article on modelling demand for services when upgrades are available. Many of the service industries have policies in place to cope with excess demand – upgrades to a higher model of rental car, or to business class seats on an airplane, for instance. Although these policies are well documented in most of the organisations, they’re apparently poorly monitored for purposes other than internal policing. The authors of this paper posit that “significant benefits can be gained if the possibility of service substitution is accounted for at the time of capacity planning, rather than only at the time of service delivery.”

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