Joint demand and capacity optimization in a service system

Service is different from product, its intangibility, simultaneity and heterogeneity make it unable to store, and so its demand and supply are different. This paper studies both price and waiting time's influence on demand and supply in a service company, by affecting customer's demand and service provider's capacity. We constructs a queuing-based optimization model with underlying quasi birth-and-death process and state-dependent functions and use some real data to experiment, the result indicates that when take demand and capacity into consideration at the same time, a better operating performance can be achieved.