Capacity Management for A Leasing System with Different Equipment and Batch Demands

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Abstract

This paper studies the admission and capacity allocation problem 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 distributions and their rental durations follow a negative exponential distribution. The lessor can admit partially the specified demands with the required type of equipment, and admit 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 (MDP), prove the antimultimodularity 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 policy and find that the optimal policy has limited sensitivity to the system state. Numerical studies are conducted to compare the performances of the optimal policy and two heuristic methods and to get some managerial insights by analysis.

The Speaker

Dr Wendy Jiao is a Senior Lecturer in Operations Management at the University of Exeter Business School since September 2021. Prior to joining Exeter, Wendy was a Lecturer in Operations Management at Loughborough University and a post-doctoral fellow at The Hong Kong Polytechnic University. Wendy’s research interests focus on B2B revenue management, inventory management and capacity management. She is the Principle investigator of a British Academy\Leverhulme Small Research Grant. She was the Early Career Researchers Committee chair at The Operational Research Society, UK. Besides, she is also a reviewer for several journals including Production and Operations Management, Naval Research Logistics, Computers & Operations Research, Omega, Transportation Research Part B, Transportation Research Part E, Electronic Commerce Research and Applications.