Price and Effort Decision of Queuing System: A Principal-agent Perspective

In a queuing system composed of a principal and an agent, the service price and service effort level affect the customer arrival rate and service efficiency, respectively. This paper studies the service pricing and effort decision of the queuing system under four different scenarios named exogenous centralized decision-making, exogenous decentralized decision-making, endogenous centralized decision-making and endogenous decentralized decision-making. The results show that, regardless of the price is endogenous or exogenous, the two-part tariff contract designed by the principal can incentive the agent to make a optimal effort level, which is equal to that under the centralized decision-making. When the endogenous price is less than the exogenous price, the service effort under the endogenous price scenario will be higher than that under the exogenous price scenario.