Optimal firm's policy under lead time-and price-dependent demand: interest of customers rejection policy

Abstract

Considering a lead-time-and price-sensitive demand, we investigate whether a client rejection policy, modeled as M/M/1/K system, can be more profitable than an all-client acceptance policy, modeled as M/M/1 system. We provide analytical insights for the cases with and without holding and penalty costs by comparing M/M/1/1 to M/M/1 models.