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IBM Case
INDIAN INSTITUTE OF MANAGEMENT
AHMEDABAD • INDIA

Research and Publications

Minimizing Customer Waiting Costs for Rental
Vehicle Providers using Threshold Reservation Policies
Jennifer A. Pazour
Debjit Roy
W.P. No. 2012-12-05
December 2012



The main objective of the Working Paper series of IIMA is to help faculty members, research staff, and doctoral students to speedily share their research findings with professional colleagues and to test out their research findings at the pre-publication stage.



INDIAN INSTITUTE OF MANAGEMENT
AHMEDABAD – 380015
INDIA

W.P. No. 2012-12-05

Page No. 1

IIMA • INDIA

Research and Publications

Minimizing Customer Waiting Costs for Rental Vehicle
Providers using Threshold Reservation Policies
Jennifer A. Pazour
Debjit Roy

Abstract: Vehicle rental providers offer differentiated services to reserve and walk-in customers. In this research, we study one such service differentiation strategy, a vehicle threshold policy, which is to hold vehicles for reserve class customers in anticipation of their future arrivals. To consider the impact that vehicle threshold policies have on reserve and walk-in customer waiting times, we model a rental depot as a multi-class non-work-conserving semi-open queue with stochastic inputs. For exponential and deterministic service time distributions, we identify the optimal threshold quantity for stationary customer arrivals using closed-form expressions for the expected waiting times of both customer classes. For non-stationary customer arrivals, we develop different threshold policies and analyze their performance using a detailed simulation model. Through numerical testing, we provide insights into recommended threshold policies that can be applied to improve the profitability of a rental provider.

Keywords: Transportation; Vehicle rental system; Customer service differentiation; Semi-open non-work conserving queue; Priority threshold queuing



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