Joint decisions on pricing and capacity allocation for cyberspace rental services

For cyberspace rental service providers with multiple services, study about how to control capacity allocation on fixed aggregate capacity and how to price services is a significant problem. This paper firstly reviews some research about pricing and capacity control, and then builds models relevant to consumers´ reservation price and preferences, based on the assumption that customer arrival process is a Poisson process. Next expected revenue under different situations and solutions to it is presented. Finally, numerical examples are given to calculate the optical price and allocation as well as its expected revenue, so that relations between the optimal value, expected revenue and reservation price and preferences are verified. From the analysis the following conclusions are drew: l)The greater the customer subjective value variability of some service is, the higher its price and capacity allocation are; and the price of its substitute service will rise, but the capacity allocation of its substitute service will drop. 2) When the performance of some service is strengthened, its price will rise as well as its capacity allocation and expected revenue; and the price of its substitute service will rise, but the capacity allocation of its substitute service will drop. So service providers should strive to upgrade service performances.