Advance Selling and Upgrading in Priority Queues
Amusement parks can boost revenue by selling advance and spot tickets with on-site upgrades based on congestion risk and prices. A queueing model integrates advance selling and upgrading, revealing that upgrades add no revenue when spot prices are moderate. But high spot prices make upgrades profitable and improve social welfare despite lower consumer surplus. Numerical simulations show upgrading narrows revenue gaps under congestion. The study adds customer balking and wait times but needs empirical validation.
What it examines
This study examines how an amusement park can price fast-track and regular tickets in advance and on-site. Using a two-stage queueing game with uncertain congestion, it compares selling schemes with and without upgrade options to find the price plan that maximizes revenue under different customer access scenarios.
What it concludes
Results show that when spot ticket prices are moderate, advance and on-site selling yields the same revenue as selling with upgrades, making upgrades unnecessary. Otherwise, upgrades boost revenue but lower consumer surplus. This guides ticket sellers and suggests studying customer balking, wait times, and pricing under uncertainty.
Evidence objects
Researchers integrate advance ticket sales and on-site upgrades into a priority-queuing model, unveiling an advance-and-spot selling scheme that explains theme parks diverse pricing tactics under varying congestion risks and pricing.
key_findings bullet 1 · key_findings · validation V0
Surprisingly, when spot ticket prices remain moderate, on-site upgrades generate no additional revenue. Yet if spot prices surge, adding upgrades boosts profits and social welfare, though consumer surplus declines slightly.
key_findings bullet 2 · key_findings · validation V0
Using a two-stage queueing game under full and partial advance access, numerical simulations reveal upgrades close revenue gaps amid high congestion. Extensions include customer balking, empirical validation remains research target.
key_findings bullet 3 · key_findings · validation V0
By integrating advance selling and spot pricing with priority upgrades in amusement park ticket queues, this paper offers a novel service operations model. Its originality lies in blending dynamic pricing and upgrading mechanisms within queueing economics, yielding fresh revenue management insights. Readers valuing incremental, sound advances will find it compelling.
key_findings bullet 4 · key_findings · validation V0
Raw abstract and provenance
Problem definition: We study advance selling and upgrading in a priority queue setting that emerges in the amusement park industry. Customers choose to buy fast-track or regular tickets depending on their heterogeneous waiting costs. At the park entrance, customers can choose tickets based on the observed congestion levels. Customers who purchase tickets in advance suffer from congestion uncertainty. Upgrading options allow customers to purchase regular tickets in advance and upgrade on-site if the congestion turns out to be high. The seller’s objective is to find the optimal pricing scheme to maximize revenue. Methodology/results: We analyze a two-stage model in a queueing game framework. Under full coverage and fixed regular ticket prices, the seller sets the priority ticket prices to maximize the revenue. We investigate two pricing schemes, both with and without upgrading options, under different scenarios depending on the proportion of customers who have access to advance ticket purchasing. When all customers have access to advance ticket purchasing, our findings indicate that the advance-and-spot selling scheme yields the same maximum revenue as the scheme that includes the upgrading option if the spot regular ticket price is not too large; thus, the upgrading option becomes unnecessary. Otherwise, allowing upgrading generates more revenue (and social welfare). Interestingly, although upgrading options offer consumers greater flexibility, they reduce consumer surplus in scenarios where upgrading increases revenue. When some customers only purchase tickets on the spot, our numerical analysis shows that allowing upgrading results in higher revenue when the probability of high system congestion is large and highlights cases when the revenue gap is significant. Finally, we extend our analysis to account for customers’ balking behavior and the additional waiting time incurred when purchasing tickets on the spot, providing a robust check on scheme comparison. Managerial implications: Our paper is one of the first to investigate—in the context of queueing economics—the advance selling strategy together with upgrading option, taking into account arrival rate uncertainty. Our results offer guidance on selling scheme design for ticket sellers and provide one economic explanation for the various pricing policies seen in the amusement park industry. Funding: Financial support from the National Natural Science Foundation of China [Grants 72101248, 72471215, 72122019, 72471005, and 72031006] is gratefully acknowledged. Supplemental Material: The online appendix is available at https://doi.org/10.1287/msom.2023.0410 .
Source row: 115 · abstract type: unknown