Accepted Manuscript

The M/M/1+M queue with a utility-maximizing server

Dongyuan Zhan, Amy R. Ward

PII: S0167-6377(18)30218-9
DOI: https://doi.org/10.1016/j.orl.2018.08.004
Reference: OPERES 6386

To appear in: Operations Research Letters

Received date : 9 May 2018

Revised date : 26 July 2018
Accepted date : 23 August 2018

Please cite this article as: D. Zhan, A.R. Ward, The M/M/1+M queue with a utility-maximizing
server, Operations Research Letters (2018), https://doi.org/10.1016/j.orl.2018.08.004

This is a PDF file of an unedited manuscript that has been accepted for publication. As a service to
our customers we are providing this early version of the manuscript. The manuscript will undergo
copyediting, typesetting, and review of the resulting proof before it is published in its final form.
Please note that during the production process errors may be discovered which could affect the
content, and all legal disclaimers that apply to the journal pertain.
 The M/M/1+M Queue with a Utility-Maximizing Server

Dongyuan Zhana , Amy R. Wardb

a School of Management, University College London, London E14 5AB, d.zhan@ucl.ac.uk
b Booth School of Business, University of Chicago, Chicago, IL 60637, amy.ward@chicagobooth.edu

Abstract
We consider an M/M/1+M queue with a human server, who is influenced by incentives. Specifically, the server chooses his
service rate by maximizing his utility function. Our objective is to guarantee the existence of a unique maximum. The complication
is that most sensible utility functions depend on the server utilization, a non-simple expression. We derive a property of the
utilization that guarantees quasiconcavity of any utility function that multiplies the server’s concave (including linear) “value” of
his service rate by the server utilization.
Keywords: M/M/1+M, Utilization, Server Utility, Endogenous Service Rate

1. Introduction death process. The function V could model a piece-rate pay-

Traditional single-server queueing models assume the ser-
vice rate is exogeneous. This is sensible when the server is
a machine. However, when the server is human, the balance
between payment and required effort determines the resulting
service rate. We model this by assuming the server has a util-
ity function, and that the service rate emerges when the server
maximizes his utility function.
The relevant question is: When does there exist a unique ser-
vice rate? We answer this question in the context of a single-
server queue with abandonment. Customers arrive to the sys-
tem according to a Poisson process at rate λ, and the maximum
amount of time each customer is willing to wait for service is
an independent random sample from an exponential distribution
with mean 1/θ. Any customer whose wait exceeds that maxi-
mum abandons the system without receiving service. Service
times are independent and exponential, and, for a given utility
function U, have rate
µ̂ := argmaxµ∈[µ,µ] U(µ)
ment to the server, as in [11], in which case V(µ) = pµ, where
p ≥ 0 is the payment per finished service. Or, the function
V could represent a piece-rate payment that additionally ac-
counts for quality, as in [12]. As a final example, the func-
tion V could trade off monetary payment and effort. Then,
V(µ) = M(µ) − c(µ), where M is some kind of piece-rate pay-
ment function and c represents the per-unit-busy-time cost. The
function c would model the decrease in utility caused by in-
creased effort, as is common in labor economics (see [3]).
In this paper, we prove the following result.
Theorem 1. If V is a concave (including linear) function in µ,
then there exists a unique utility-maximizing service rate µ̂.
The key to the proof of Theorem 1 is the following property
of the utilization function in an M/M/1+M queue, that may be
helpful in other endogeneous service rate queueing models.
Lemma 1.  0 2 00
(1) 2 B (µ) − B(µ)B (µ) > 0.

when the maximum is unique, where U is the utility function,
and 0 < µ ≤ µ < ∞ are the lower and upper bounds on the
possible service rate. In summary, we consider an M/M/1+M
queue except that the service rate is determined as in (1).
The utility function is assumed to have the form
The remainder of this paper is organized as follows. We end
this section with a brief literature review. Section 2 proves The-
orem 1 under the assumption that Lemma 1 holds. Section 3
proves Lemma 1.

U(µ) := V(µ) × B(µ) ≥ 0, Literature Review

where the non-negative function V is the server’s value of com- The service rate that maximizes the server’s utility is solution
pleting µ tasks per time unit and to a queueing game. There is a large literature on the queueing
P∞ games, well surveyed by [9] and [8]. Much of that literature
i−1
Y
i=1 ai (µ) λ assumes a fixed service rate (or rates in the case of a many-
B(µ) := P ∞ for ai (µ) := server model), and focuses on how utility-maximizing customer
1 + i=1 ai (µ) k=0
µ + kθ
decisions (such as whether or not to queue, and behind which
is the utilization function, which can be computed in a straight- server to queue) affect system performance. Some exceptions
forward manner because the M/M/1+M queue is a birth and (that is, papers that allow the service rates to be the solution
Preprint submitted to Operations Research Letters July 26, 2018
to a game) are [10], [7],[1], [2], [5], [6]. A main challenge in
Figure 1: The service rate as functions of the piece-rate incentive and effort cost
all these papers is to guarantee the existence and uniqueness 
μ
of the equilibrium service rate(s), for which the assumptions 20

on the server utility function is critical. However, none of the

aforementioned papers allow for customer abandonment. 15

10
2. The Utility-Maximizing Service Rate

5
The server wants to maximize his utility

max U(µ) = V(µ)B(µ). 0 10 20 30 40

p
µ∈[µ,µ]
(a) c = 1, r = 2
The issue is to know when the above maximization leads to μ

a unique service rate µ. If there is non-uniqueness, then µ̂ in 20

(1) is not well-defined. As a consequence, system performance

cannot be predicted through the use of M/M/1+M queueing for- 15

mulae. Theorem 1 provides a sufficient condition for the maxi-

mum in (1) to be unique, implying that the service rate in (1) is 10
well-defined.
5

Proof of Theorem 1
c
0 1 2 3 4 5

The first order condition of the utility maximization is (b) p = 20, r = 2

0 0 0 μ
U (µ) = V (µ)B(µ) + V(µ)B (µ) = 0. 20

The second order derivative is 15

00 00 0 0 00
U (µ) = V (µ)B(µ) + 2V (µ)B (µ) + V(µ)B (µ)
10
0
00 V(µ)  00 0
 0 B (µ)
= V (µ)B(µ) + B(µ)B (µ) − 2(B (µ))2 + 2U (µ) .
B(µ) B(µ) 5

00
From the concavity of V we know V ≤ 0 so the first term is
0 00
non-positive. From Lemma 1, 2(B (µ))2 − B(µ)B (µ) > 0, and 1.5 2.0 2.5 3.0
r

the second term is negative. At a stationary point satisfying (c) p = 20, c = 1

0 00
U (µ) = 0, the third term is zero, and so U (µ) < 0. Hence, any
stationary point is a local maximum. Since any stationary point
must be a local maximum, there can exist at most one stationary
0 3. Proof of Lemma 1
point. In summary, U (µ) has at most one zero point, which is
a local maximum, implying quasiconcavity.
We end this section with an example in which there is piece- We prove Lemma 1 in three steps:
rate payment and a convex effort cost; specifically, assume 00 0
• Step 1: We show B (µ)B(µ) − 2(B (µ))2 < 0 is equivalent
r to
V(µ) = pµ − cµ for µ ≥ 0, c > 0, r > 1.
∞ 2 ∞ ∞
X  X X
Since V is concave, Theorem 1 guarantees 2  ai bi  − ai ai (b2i + ci ) > 0, (2)
i=1 i=1 i=1
µ̂ = argmaxµ∈[0,∞] (pµ − cµr )B(µ)
for ai as defined earlier and
is unique. Assuming λ = 10, θ = 1, Figure 1 solves for µ̂ nu- i−1
X i−1
X
merically by changing one parameter among p, c, r and fixing 1 1
bi = , ci = , i ∈ N +,
the other two. Consistent with intuition, the service rate in- k=0
µ + kθ k=0
(µ + kθ)2
creases as the piece-rate incentive p increases, and decreases as
the effort cost coefficient c or r increases. where N + := {1, 2, · · · }.
2
 • Step 2: We rewrite (2) as Substituting for the above two expressions shows
00
 0 2
X m−1
∞ X   B (µ)B(µ) − 2 B (µ) = − (1 − B(µ))3 ×
am− j a j 2bm− j b j − b2j − c j .  ∞ 2 ∞ 
 X  X ∞
X 
m=2 j=1 
2  ai (µ)bi (µ) −
   ai (µ) ai (µ)(bi (µ) + ci (µ)) .
2

Then, for each m ≥ 2, we show that i=1 i=1 i=1

00
m−1
X   Since 1 − B(µ) > 0 for all µ ∈ [µ, µ], showing B (µ)B(µ) −
 0 2
am− j a j 2bm− j b j − b2j − c j 2 B (µ) < 0 is equivalent to showing (2).
j=1
Finally, the two interchanges of summation and derivative we
m−1
X must justify are: 0
≥ am−J(m) a J(m) 2bm− j b j − b2j − c j , P
(i) ∞

P
ai (µ) = ∞
0
i=1 ai (µ),
j=1 Pi=1
0 P 0 0
(ii) ∞ i=1 ai (µ)bi (µ) =
∞
i=1 ai (µ)bi (µ) + ai (µ)bi (µ).
P
where J(m) ∈ {1, · · · , bm/2c} will be defined in that step. To show (i), first observe it is straightforward to see ∞ i=1 ai (µ) <
∞ (by, for example, the ratio test), and that ai (µ) is continuous
• Step 3: We prove that for any m ≥ 2, in µ for each i ∈ N + . Then, to establish (i) (see, for exam-
P 0
m−1
X ple, Theorem 2.4.3 in [4]), we must show ∞ i=1 ai (µ) converges
2bm− j b j − b2j − c j > 0, uniformly on every closed bounded subinterval of [µ, µ]. Since
 0 
j=1 ai (µ) = ai (µ)bi (µ) and bi < i/µ for every i ∈ N + , if we define
 i−1
i
which completes the proof. mi := m λθ λ
(i−1)! for any finite m > µ2 , then

Step 1:  0  i Y i−1
λ
i−1
iλ Y λ
0
We regard ai and bi as functions of µ, and write ai (µ) and ai (µ) < = 2 < mi , for all µ ∈ [µ, µ].
0 µ k=0 µ + kθ µ k=1 µ + kθ
bi (µ) for their derivatives. For any i ∈ N , we have
+

The Weierstrass M-test implies the uniform convergence holds

i−1
X P
0 1 if ∞ i=1 mi < ∞, which is true by the ratio test
ai (µ) = −ai (µ) = −ai (µ)bi (µ),  
k=0
µ + kθ  mi+1  λi+1
lim   = lim = 0.
i→∞  mi  i→∞ θ i2
i−1
X
0 1  
(i2 +i)λ λ i−1
bi (µ) = − = −ci (µ). Similarly, if we re-define mi := (i−1)!µ for any i ∈ N + ,
(µ + kθ)2 3 θ
k=0 then
Assuming the interchange of summation and derivative,  0  0 
(a (µ)b (µ))  = a (µ)b (µ) + a (µ)b (µ) = a (µ)(b2 (µ) + c (µ))
0
i i i i i i i i i
!0 P∞ 0 !
1 i=1 ai (µ)
i−1
Y i−1
0
B (µ) = 1 − P∞ = λ i i 2
(i + i)λ Y λ
2

1 + i=1 ai (µ) P
2 < + 2 = < mi .

1+ ∞ i=1 ai (µ) µ + kθ µ 2 µ µ3 µ + kθ
k=0 k=1
X ∞ P 0
= −(1 − B(µ))2 ai (µ)bi (µ), The Weierstrass M-test implies ∞ i=1 (ai (µ)bi (µ)) converges
i=1 uniformly on every closed bounded subinterval of [µ, µ] if
P∞
and, using the above expression, i=1 mi < ∞, which is true by the ratio test
 
 mi+1  λi+2
∞
X lim   = lim = 0.
00 0 i→∞  mi  i→∞ θ i2
B (µ) = 2(1 − B(µ))B (µ) ai (µ)bi (µ)
i=1 Step 2:
∞ 0 We drop the argument µ in ai , bi , ci for i ∈ {1, 2, · · · } for no-
X 
− (1 − B(µ))  ai (µ)bi (µ)
2 tational convenience. Then from algebra and re-arranging the
i=1 order of summation terms,
∞ 2 ∞ 2 ∞
3
X  X  X X ∞
= −2(1 − B(µ))  ai (µ)bi (µ)
 2  ai bi  − ai ai (b2i + ci )
i=1 i=1 i=1 i=1
X∞   X∞ X
∞ X∞ X
∞
0 0
− (1 − B(µ))2 ai (µ)bi (µ) + ai (µ)bi (µ) =2 ai bi a j b j − ai a j (b2j + c j )
i=1 i=1 j=1 i=1 j=1
∞ 2
3
X  ∞ X
X ∞  
= −2(1 − B(µ))  ai (µ)bi (µ)
 = ai a j 2bi b j − b2j − c j
i=1 i=1 j=1
X∞
X m−1
∞ X  
+ (1 − B(µ))2 ai (µ)(b2i (µ) + ci (µ)). = am− j a j 2bm− j b j − b2j − c j .
i=1
m=2 j=1

3
To identify a lower bound for the inner summation term, it is Since j < bm/2c, we have j + 1 ≤ m − j − 1. Therefore, µ+1 jθ >
helpful to observe the following: 1
µ+(m− j−1)θ , b j+1 ≤ bm− j−1 and b j < bm− j−1 < bm− j . The above is
(i) First, for ∆(m, j) := 4bm− j b j − b2j − b2m− j − c j − cm− j , negative.
m−1
X Step 3:
 
am− j a j 2bm− j b j − b2j − c j From the definition of b j , j ∈ N + ,
j=1
m−1
X m−1 m−
X X j−1 j−1 m−1 X
b(m−1)/2c
X ∆(m, m/2) 1 X 1 X 1 1
= am− j a j ∆(m, j) + 1{m is even}; bm− j b j = = .
2 j=1 j=1 k=0
µ + kθ l=0 µ + lθ j=1 k+l< j
µ + kθ µ + lθ
j=1

(ii) Second, a j am− j is increasing for j ∈ {1, · · · , bm/2c} be- The second equality, which is equivalent to
cause
λ X j−1 m−
m−1 X X j−1 X j−1 j−1−l
m−1 X X
am− j−1 a j+1 µ+ jθ 1 1 1 1
= = ,
am− j a j λ
j=1 l=0 k=0
µ + kθ µ + lθ j=1 l=0 k=0
µ + kθ µ + lθ
µ+(m− j−1)θ
µ + (m − j − 1)θ
= > 1 for j ∈ {1, · · · , bm/2c − 1}. can be shown through a geometric argument. Define
µ + jθ 1 1 Pm−1 P j−1 Pm− j−1
f (k, l, j) := µ+kθ µ+lθ . Then j=1 l=0 k=0 f (k, l, j)
Suppose we can show that for every positive integer m ≥ corresponds to triangular pyramid OABD in Figure 2;
2, there exists an integer J(m) such that ∆(m, j) < 0 for j ∈ Pm−1 P j−1 P j−1−l
j=1 l=0 k=0 f (k, l, j) corresponds to triangular pyramid
{1, · · · , J(m) − 1} and ∆(m, j) ≥ 0 for j ∈ {J(m), · · · , bm/2c}. OABC. OABD is equivalent to OABC if we map the points in
Then, also using (i) and (ii) above, the direction of j axis since the value of f (k, l, j) is independent
am− j a j ∆(m, j) ≥ am−J(m) a J(m) ∆(m, j) for all j ∈ {1, · · · , bm/2c}. of j.

so that
Figure 2: The equivalence of two summations
m−1
X   k
am− j a j 2bm− j b j − b2j − c j
j=1
b(m−1)/2c  m-2 D C
 X ∆(m, m/2)  k=m-1-j
≥ am−J(m) a J(m)  ∆(m, j) + 1{m is even}
j=1
2
m−1 
X 
= am−J(m) a J(m) 2bm− j b j − b2j − c j .
j=1

Note that the above equality is still valid if ∆(m, j) > 0 for
all j ∈ {1, · · · , bm/2c} (J(m) = 1) or if ∆(m, j) ≤ 0 for all (1,0,0) B
j ∈ {1, · · · , bm/2c} (J(m) = bm/2c). O m-1 j
Now we justify the existence of J(m) for any m ≥ 2 by show-
ing the monotonicity of ∆(m, j) in j when j ∈ {1, · · · , bm/2c}.
Specifically, for j ∈ {1, · · · , bm/2c − 1}, m-2 A
l=j-1
∆(m, j) − ∆(m, j + 1) l
= 4(bm− j b j − bm− j−1 b j+1 ) + (b2j+1 − b2j ) − (b2m− j − b2m− j−1 )
+ (c j+1 − c j ) − (cm− j − cm− j−1 )
! !
bm− j−1 bj 2b j+1 1
=4 − + + −
µ + jθ µ + (m − j − 1)θ µ + jθ (µ + jθ)2 Next, algebra gives
!
2bm− j 1
− − m−1
X
µ + (m − j − 1)θ (µ + (m − j − 1)θ)2 2bm− j b j − b2j − c j
1 1 j=1
+ −  
(µ + jθ)2 (µ + (m − j − 1)θ)2 m−1 
X
 j−1 2 j−1 
!  X 1 1 

 X 1  
 X 1 
bm− j−1 bj 2 −  −
=2 − +
=  µ + kθ µ + lθ  µ + kθ

(µ + kθ) 2  .
µ + jθ µ + (m − j − 1)θ j=1 k+l< j k=0 k=0
   
2 bm− j−1 − b j+1 2 bm− j − b j
− − . To complete the proof, it is sufficient to show each term in the
µ + jθ µ + (m − j − 1)θ above summation is positive. This follows from the following
4
sequence of equalities [8] R. Hassin, Rational queueing, CRC Press, 2016
[9] R. Hassin, M. Haviv, To queue or not to queue: Equilibrium behavior in
 j−1 2 j−1 queueing systems, Kluwer Academic Publishers, 2003.
X 1 1 X 1  X 1
2 −   − [10] E. Kalai, M. I. Kamien, M. Rubinovitch, Optimal service speeds in a
µ + kθ µ + lθ µ + kθ  (µ + kθ)2 competitive environment, Manag. Sci. 38(8), (1992) 1154-1163.
k+l< j k=0 k=0
[11] Z.J. Ren, Y.P. Zhou, Call center outsourcing: Coordinating staffing level
X XX 1 j−1 j−1 X j−1 and service quality, Manag. Sci. 54(2), (2008) 369-383.
1 1 1 1
=2 − − [12] D. Zhan, A.R. Ward, Incentive based service system design: Staffing and
k+l< j
µ + kθ µ + lθ k=0 l=0
µ + kθ µ + lθ k=0
(µ + kθ)2 compensation to trade off speed and quality, 2017 (working paper).

X X Xj−1
1 1 1 1 1
= − −
k+l< j
µ + kθ µ + lθ k< j,l< j,k+l≥ j
µ + kθ µ + lθ k=0
(µ + kθ)2
X 1 1 X 1 X 1
= + 2
−
k+l≤ j−1,k,l
µ + kθ µ + lθ k< j/2
(µ + kθ) j/2≤k< j
(µ + kθ)2
X j−1
X
1 1 1
− −
k< j,l< j,k+l≥ j,k,l
µ + kθ µ + lθ k=0
(µ + kθ)2
X 1 1 X 1 1
= +
k+l≤ j−2,k,l
µ + kθ µ + lθ k+l= j−1,k,l
µ + kθ µ + lθ
X 1 1 X 1
− −2 .
k< j,l< j,k+l≥ j,k,l
µ + kθ µ + lθ j/2≤k< j
(µ + kθ)2

For any pair (k, l) in the set {(k, l)|0 ≤ k ≤ j − 1, 0 ≤ l ≤

j − 1, k + l ≤ j − 2, k , l}, ( j − 1 − k, j − 1 − l) is in the set
{(k, l)|0 ≤ k ≤ j − 1, 0 ≤ l ≤ j − 1, k + l ≥ j, k , l}, and vice
versa. Therefore,
X 1 1 X 1 1
−
k+l≤ j−2,k,l
µ + kθ µ + lθ k< j,l< j,k+l≥ j,k,l
µ + kθ µ + lθ
X !
1 1 1 1
= − .
k+l≤ j−2,k,l
µ + kθ µ + lθ µ + ( j − 1 − l)θ µ + ( j − 1 − k)θ

Note that j − 1 − k > l and j − 1 − l > k, hence the above is

positive. Meanwhile,
X 1 1 X 2 1
=
k+l= j−1,k,l
µ + kθ µ + lθ j/2≤k< j
µ + kθ µ + ( j − 1 − k)θ
X 2
> .
j/2≤k< j
(µ + kθ)2

References
[1] G.P. Cachon, P.T Harker, Competition and outsourcing with scale
economies, Manag. Sci. 48(10), (2002) 1314-1333.
[2] G.P. Cachon, F. Zhang, Obtaining fast service in a queueing system via
performance-based allocation of demand, Manag. Sci. 53(3), (2007) 408-
420.
[3] P. Cahuc, A. Zylberberg, Labor Economics, MIT Press, 2004.
[4] G. Casella, R. L. Berger. Statistical Inference, 2nd Ed, Duxbury Press,
2002
[5] L.G Debo, L.B. Toktay, L.N. Van Wassenhove, Queuing for Expert Ser-
vices, Manag. Sci. 54(8), (2008) 1497-1512.
[6] X. Geng, W.T. Huh, M. Nagarajan, Fairness among servers when capacity
decisions are endogenous. Production and Operations Management, 24(6)
(2015) 961-974.
[7] S.M. Gilbert, Z.K. Weng, Incentive effects favor nonconsolidating queues
in a service system: The principal-agent perspective, Manag. Sci. 44(12),
(1998) 1662-1669.