Capacity management for a leasing system with different equipment and batch demands

Xufeng Yang, Wen Jiao, Juliang Zhang and Hong Yan

Production and Operations Management, 2022, vol. 31, issue 7, 3004-3020

Abstract: This work explores the admission and capacity allocation for a leasing system with two types of equipment and three kinds of batch demands: elementary specified, premium specified, and unspecified demands. The demands arrive following mutually independent Poisson processes, and the rental duration of equipment follows a negative exponential distribution. The lessor can satisfy partially the specified demands with the required type of equipment and satisfy partially the unspecified demands with any type of equipment. The objective is to maximize the expected discounted revenue. We formulate this problem as a Markov decision process, prove the anti‐multimodularity of the value function, and characterize the structure of the optimal policy. We show that the optimal policy has a simple structure and is characterized by state‐dependent rationing and priority thresholds. Moreover, a solution algorithm is proposed to calculate the optimal policy. We study the impacts of the system state on the optimal action and find that the optimal action has limited sensitivity to the system state. Numerical studies are conducted to compare the performance of the optimal policy with that of two heuristic methods and to derive some managerial insights by analysis. We further discuss batch acceptance.

Date: 2022
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

Downloads: (external link)
https://doi.org/10.1111/poms.13736

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:bla:popmgt:v:31:y:2022:i:7:p:3004-3020

Ordering information: This journal article can be ordered from
http://onlinelibrary ... 1111/(ISSN)1937-5956

Access Statistics for this article

Production and Operations Management is currently edited by Kalyan Singhal

More articles in Production and Operations Management from Production and Operations Management Society
Bibliographic data for series maintained by Wiley Content Delivery ().