Abstract

For some service facilities, the unused servicecapacity cannot be stocked overnight and will become a burdento the service provider. The main purpose of this article is toanalyze the effects of seasonality on capacity choice decisionsand examine the firm’s pricing strategies. We present amathematical model and find that higher operating costs lead tolower service fees in booming seasons and higher service fee innormal seasons, but the capacity should be decreased; thehigher proportion of booming seasons in a year results in higherservice fee in booming seasons and lower service fee in normalseasons, and the capacity should be increased. The pricemarkup in booming seasons is higher if the proportion ofbooming seasons increase, but lower if operating costs increase.