Pricing under quality of service uncertainty: Market segmentation via statistical QoS guaranteesHemant K. Bhargava and Daewon Sun European Journal of Operational Research, 2008, vol. 191, issue 3, pages 1189-1204 Abstract: This article examines how performance-contingent pricing schemes with long-term statistical performance guarantees can be applied to many IT services. We study two forms of performance-contingent pricing, with rebate proportional to failure rate and fixed rebate for below-threshold performance. We show that threshold-performance contingency pricing can increase both profits and fairness (customers who receive higher benefits pay higher effective price) relative to standard pricing. But an even better solution is to offer a menu of performance guarantees: this can increase the firm's profit and segment the market. Only service providers whose performance level is sufficiently better than the industry standard can benefit from this pricing mechanism. Downloads: (external link) Related works: Access Statistics for this article European Journal of Operational Research is edited by Roman Slowinski, Jesus Artalejo, Jean-Charles. Billaut, Robert Dyson and Lorenzo Peccati More articles in European Journal of Operational Research from Elsevier |
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