Estimation of service value parameters for a queue with unobserved balking

Abstract

In Naor's model [16], customers decide whether or not to join a queue after observing its length. We suppose that customers are heterogeneous in their service value (reward) $R$ from completed service and homogeneous in the cost of staying in the system per unit of time. It is assumed that the values of customers are independent random variables generated from a common parametric distribution. The manager observes the queue length process, but not the balking customers. Based on the queue length data, an MLE is constructed for the underlying parameters of $R$. We provide verifiable conditions for which the estimator is consistent and asymptotically normal. A dynamic pricing scheme is constructed that starts from some arbitrary price and iteratively updates the price using the estimated parameters. The performance of the estimator and the pricing algorithm are studied through a series of simulation experiments.