Problem Motivation

OUR OBJECTIVE: The main objective is to maximize the long-run reward or profit by using the proper pricing control method. We should carefully balance the consequences of a price change. For instance, if the manager increases the price at a time point, the arrival rate is reduced and hold costs of the system tend to decrease. On the contrary, if the manager decreases the price at a time point, the arrival rate will increase and the hold cost tend to increase with the growth of queue length. So, we need to seek to an optimal policy in order to obtain the maximum profit.

In our daily life, it is an effective control method to control the queues by using price control policy.

The manager can use higher daytime price for parking in the downtown to reduce the traffic jam.

The manager can use lower price to encourage customers to come to the playground during the winter, and higher price to limit the customers to come.

The manager of the power company can decide to use extra charges for overload electricity.