Pricing Services Subject to Congestion: Charge Per-Use Fees or Sell Subscriptions?

Gérard P. Cachon
Gérard P. Cachon
[email protected]
Operations and Information Management, The Wharton School, University of Pennsylvania, Philadelphia, Pennsylvania 19104
Search for more papers by this author
,
Pnina Feldman
Pnina Feldman
[email protected]
Operations and Information Technology Management, Haas School of Business, University of California, Berkeley, Berkeley, California 94720
Search for more papers by this author

Operations and Information Management, The Wharton School, University of Pennsylvania, Philadelphia, Pennsylvania 19104

Operations and Information Technology Management, Haas School of Business, University of California, Berkeley, Berkeley, California 94720

Search for more papers by this author

Published Online:21 Jan 2011https://doi.org/10.1287/msom.1100.0315

Supplemental Material

msom.1100.0315-sm-pricing_services.pdf (134 KB)

Cited by
- Freemium and Subscription Pricing
- Vehicle-Based Multi-Services for Future Smart Cities
  Hao Sun,
  Jinhua Zhao,
  Hai Yang,
  Shenhao Wang,
  Hamsa Balakrishnan,
  Thomas W. Malone,
  Hai Wang
  17 March 2026 | Service Science, Vol. 18, No. 2
- Nonprofit vs. for Profit: Allocation of Beds and Access to Care in U.S. Nursing Homes
  Yangzi Jiang,
  Lauren Xiaoyuan Lu,
  Jan Albert Van Mieghem
  25 May 2026 | Manufacturing & Service Operations Management, Vol. 0, No. 0
- Nonlinear trade-offs in GenAI application pricing: a game-theoretic analysis of API and psychological costs
  20 May 2026 | International Journal of Production Research, Vol. 59
- EXPRESS: Pay More, Use More: Consumer Bias and Demand Management for Digital Services
  15 May 2026 | Production and Operations Management
- Platform Disintermediation: Information Effects and Pricing Remedies
  Shreyas Sekar,
  Auyon Siddiq
  6 January 2026 | Operations Research, Vol. 74, No. 3
- Accelerating the transition from linear to circular systems through a subscription-based approach
  28 December 2025 | International Journal of Production Research, Vol. 64, No. 5
- Static Pricing Guarantees for Queueing Systems
  Jacob Bergquist,
  Adam N. Elmachtoub
  16 December 2025 | Stochastic Systems, Vol. 16, No. 1
- Distributionally Robust Monopoly Pricing: Switching from Low to High Prices in Volatile Markets
  Tim S. G. van Eck,
  Pieter Kleer,
  Johan S. H. van Leeuwaarden
  24 February 2026 | Manufacturing & Service Operations Management, Vol. 0, No. 0
- Optimal subscription pricing strategy for SaaS vendors: short-term, long-term or hybrid?
  5 January 2026 | Information Technology and Management, Vol. 11
- Dynamic Seat Selection Surcharge and Allocation Policy in Selling High-Speed Train Tickets
  11 August 2025 | Production and Operations Management, Vol. 35, No. 1
- Optimal Pricing Design for Capacity-Constrained Electric Freight Charging Stations
  1 January 2026 | SSRN Electronic Journal, Vol. 15
- Optimal Revenue Sharing for Circular Subscription Services in Dual-Channel Supply Chains
  Procedia CIRP, Vol. 140
- Bundle pricing of congested services
  25 October 2025 | Queueing Systems, Vol. 109, No. 4
- How the design of product-service systems affects consumer adoption
  9 June 2025 | International Journal of Production Research, Vol. 63, No. 21
- “Be the Buyer”—Leveraging the Wisdom of the Crowd in E-Commerce Assortment Planning
  Leela Nageswaran,
  Yu (Rain) Kan,
  Uttara M. Ananthakrishnan
  16 October 2025 | Management Science, Vol. 0, No. 0
- Charting the Future of Blockchain in Operations and Supply Chain Management: Opportunities and Challenges
  6 August 2025 | Journal of Operations Management, Vol. 71, No. 7
- Longer or shorter? A large-scale randomized field experiment on the impact of free trial duration on sustainable user conversion in the Freemium model
  18 June 2025 | Frontiers in Psychology, Vol. 16
- How do Internet of Things Service Pricing Schemes Affect Compatibility Investment between Platform and Smart Device Manufacturer?
  23 January 2025 | Journal of Systems Science and Systems Engineering, Vol. 34, No. 3
- Internet of Things Network Security Improvement Investment
  22 April 2024 | Business & Information Systems Engineering, Vol. 67, No. 2
- Deceleration or Charging Data Plan: Impact on Price, Profit, and Consumer Surplus
  20 March 2025 | Journal of Systems Science and Systems Engineering, Vol. 6
- Use-based vs. Time-based: Contract Design and Product Flow Dynamics in OEM Servicizing
  1 January 2025 | SSRN Electronic Journal, Vol. 63
- Bundling Variety, Usage, or Both? A Multi-Service Analysis of Pay-Per-Use and Subscription Pricing
  8 August 2024 | Production and Operations Management, Vol. 33, No. 10
- Should the Internet of Things platform enter the smart device market?
  16 July 2024 | Industrial Management & Data Systems, Vol. 124, No. 8
- Subscription-based business models in the context of tech firms: theory and applications
  30 August 2023 | International Journal of Industrial Engineering and Operations Management, Vol. 6, No. 3
- 3D Printing-as-a-Service: An Economic Analysis of Pricing and Cocreation
  11 June 2024 | Production and Operations Management, Vol. 33, No. 7
- Optimal pricing of subscription services in the restaurant industry
  13 February 2024 | Journal of Revenue and Pricing Management, Vol. 23, No. 3
- The effect of subscriptions on customer engagement
  Journal of Business Research, Vol. 178
- Subscription Pricing for Free Delivery Services
  11 March 2024 | Production and Operations Management, Vol. 33, No. 4
- On the Diffusion of Subscription-Based Services: The Roles of Price, Advertising, and Customers’ Defection
  IEEE Transactions on Engineering Management, Vol. 71
- Optimal Revenue Model of a Social Networking Service: Ad-Sponsored, Subscription-Based, or Hybrid?
  IEEE Transactions on Engineering Management, Vol. 71
- Asu Om Review Vol I
  1 January 2024 | SSRN Electronic Journal, Vol. 6
- The Enigma of Ticket Exchanges (and Other Reselling Markets)
  1 January 2024 | SSRN Electronic Journal, Vol. 13
- Inventory and supply chain management with auto‐delivery subscription
  1 December 2023 | Production and Operations Management, Vol. 32, No. 12
- Content proliferation and narrowcasting in the age of streaming media
  1 October 2023 | Production and Operations Management, Vol. 32, No. 10
- How Advance Sales Can Reduce Profits: When to Buy, When to Sell, and What Price to Charge
  Amihai Glazer,
  Refael Hassin,
  Irit Nowik
  10 May 2023 | Manufacturing & Service Operations Management, Vol. 25, No. 5
- Assessing public transport passenger attitudes towards a dynamic fare model based on in-vehicle crowdedness levels and additional waiting time
  International Journal of Transportation Science and Technology, Vol. 12, No. 3
- How to charge in servicizing: Per period or per use?
  European Journal of Operational Research, Vol. 304, No. 3
- Distance-Based Service Priority: An Innovative Mechanism to Increase System Throughput and Social Welfare
  Zhongbin Wang,
  Shiliang Cui,
  Lei Fang
  26 October 2022 | Manufacturing & Service Operations Management, Vol. 25, No. 1
- Need for speed , but how much does it cost? Unpacking the fee‐speed relationship in Bitcoin transactions
  17 July 2022 | Journal of Operations Management, Vol. 69, No. 1
- Pricing on‐demand services: Alternative ways of combining usage and access fees
  1 January 2023 | Production and Operations Management, Vol. 32, No. 1
- Platform Disintermediation: Information Effects and Pricing Remedies
  1 January 2023 | SSRN Electronic Journal, Vol. 32
- Bundling Variety, Usage, or Both? A Multi-Service Analysis of Pay-Per-Use and Subscription Pricing
  1 January 2023 | SSRN Electronic Journal, Vol. 90
- 'Be the Buyer' — Leveraging the Wisdom of the Crowd in E-Commerce Operations
  1 January 2023 | SSRN Electronic Journal, Vol. 105
- Subscription vs. Spot Pricing in On-Demand Economy
  1 January 2023 | SSRN Electronic Journal, Vol. 71
- The Important Role of Time Limits When Consumers Choose Their Time in Service
  Pnina Feldman,
  Ella Segev
  5 January 2022 | Management Science, Vol. 68, No. 9
- Does Customer Email Engagement Improve Profitability? Evidence from a Field Experiment in Subscription Service Retailing
  Yiwei Wang,
  Lauren Xiaoyuan Lu,
  Pengcheng Shi
  1 July 2022 | Manufacturing & Service Operations Management, Vol. 24, No. 5
- Profit Optimization for Mileage-Based Pricing of Electric Vehicle Lease
  IEEE Transactions on Engineering Management, Vol. 69, No. 4
- Optimal pricing strategy for a service provider in the presence of repetitive usage
  7 June 2021 | International Transactions in Operational Research, Vol. 29, No. 4
- Profit model for electric vehicle rental service: Sensitive analysis and differential pricing strategy
  Energy, Vol. 249
- Efficiency Loss and Coordination in the Online Shopping Supply Chain with Competitive Shipping Companies
  21 June 2021 | Asia-Pacific Journal of Operational Research, Vol. 39, No. 03
- On Designing a Socially Optimal Expedited Service and Its Impact on Individual Welfare
  Ricky Roet-Green,
  Aditya Shetty
  22 December 2021 | Manufacturing & Service Operations Management, Vol. 24, No. 3
- Product Price, Quality, and Service Decisions Under Consumer Choice Models
  Ruxian Wang,
  Chenxu Ke,
  Shiliang Cui
  11 February 2021 | Manufacturing & Service Operations Management, Vol. 24, No. 1
- AI-based industrial full-service offerings: A model for payment structure selection considering predictive power
  Decision Support Systems, Vol. 152
- Inventory and Supply Chain Management with Auto-Delivery Subscription
  SSRN Electronic Journal, Vol. 56
- Pricing Strategies for Online Dating Platforms
  SSRN Electronic Journal, Vol. 58
- On the Value of Subscription Models for Online Grocery Retail
  European Journal of Operational Research, Vol. 294, No. 3
- Deals or No Deals: Contract Design for Online Advertising
  Anthony Kim,
  Vahab Mirrokni,
  Hamid Nazerzadeh
  23 July 2021 | Operations Research, Vol. 69, No. 5
- From the Classics to New Tunes: A Neoclassical View on Sharing Economy and Innovative Marketplaces
  1 June 2021 | Production and Operations Management, Vol. 30, No. 6
- Can a Manufacturer Get Better off When Providing Product Sharing Services?
  Discrete Dynamics in Nature and Society, Vol. 2021
- Pricing Joint Sales and Rentals: When are Purchase Conversion Discounts Optimal?
  1 December 2020 | Production and Operations Management, Vol. 29, No. 12
- Designing Pricing Strategy for Operational and Technological Transformation
  Vineet Kumar,
  Yacheng Sun
  20 November 2019 | Management Science, Vol. 66, No. 6
- A Research Framework for Business Models: What Is Common Among Fast Fashion, E-Tailing, and Ride Sharing?
  Gérard P. Cachon
  29 August 2019 | Management Science, Vol. 66, No. 3
- Business modes in the sharing economy: How does the OEM cooperate with third-party sharing platforms?
  International Journal of Production Economics, Vol. 221
- Optimal pricing problem for a pay-per-use system based on the Internet of Things with intertemporal demand
  International Journal of Production Economics, Vol. 221
- Add-on Pricing: A Queuing Perspective
  SSRN Electronic Journal, Vol. 90
- A Model of Rational Retrials in Queues
  Shiliang Cui,
  Xuanming Su,
  Senthil Veeraraghavan
  29 October 2019 | Operations Research, Vol. 67, No. 6
- Pricing Ancillary Service Subscriptions
  Ruxian Wang,
  Maqbool Dada,
  Ozge Sahin
  27 June 2019 | Management Science, Vol. 65, No. 10
- Pricing and Prioritizing Time-Sensitive Customers with Heterogeneous Demand Rates
  Philipp Afèche,
  Opher Baron,
  Joseph Milner,
  Ricky Roet-Green
  28 May 2019 | Operations Research, Vol. 67, No. 4
- “On-demand” pricing and capacity management in cloud computing
  22 March 2018 | Journal of Revenue and Pricing Management, Vol. 18, No. 3
- Optimal Auction Design for Wi-Fi Procurement
  Liangfei Qiu,
  Huaxia Rui,
  Andrew Whinston
  1 February 2019 | Information Systems Research, Vol. 30, No. 1
- OM Forum—New Opportunities for Operations Management Research in Sustainability
  Vishal V. Agrawal,
  Atalay Atasu,
  Luk N. Van Wassenhove
  9 July 2018 | Manufacturing & Service Operations Management, Vol. 21, No. 1
- Basic Pricing Theory
  15 August 2019
- From the Classics to New Tunes: A Neoclassical View on Sharing Economy and Innovative Marketplaces
  SSRN Electronic Journal, Vol. 55
- Pricing On-Demand Services: How Best to Combine Access and Usage Fees?
  SSRN Electronic Journal, Vol. 53
- Omnichannel Service Operations with Online and Offline Self-Order Technologies
  Fei Gao,
  Xuanming Su
  24 July 2017 | Management Science, Vol. 64, No. 8
- On-Demand Service Platforms
  Terry A. Taylor
  23 July 2018 | Manufacturing & Service Operations Management, Vol. 20, No. 4
- The Value of Dynamic Pricing in Large Queueing Systems
  Jeunghyun Kim,
  Ramandeep S. Randhawa
  15 December 2017 | Operations Research, Vol. 66, No. 2
- A Research Framework for Business Models: What Is Common Among Fast Fashion, E-Tailing, and Ride Sharing?
  SSRN Electronic Journal, Vol. 17
- Bundle Pricing of Congested Services
  SSRN Electronic Journal, Vol. 55
- Optimal Three-Part Tariff Plans
  Gadi Fibich,
  Roy Klein,
  Oded Koenigsberg,
  Eitan Muller
  14 June 2017 | Operations Research, Vol. 65, No. 5
- Online Grocery Retail: Revenue Models and Environmental Impact
  Elena Belavina,
  Karan Girotra,
  Ashish Kabra
  31 May 2016 | Management Science, Vol. 63, No. 6
- Deals or No Deals
  3 April 2017
- Is Advance Selling Desirable with Competition?
  Gérard P. Cachon,
  Pnina Feldman
  19 January 2017 | Marketing Science, Vol. 36, No. 2
- Product Quality, Service and Pricing
  SSRN Electronic Journal, Vol. 40
- Service product pricing strategies based on time-sensitive customer choice behavior
  Journal of Industrial & Management Optimization, Vol. 13, No. 1
- The Limits of Planned Obsolescence for Conspicuous Durable Goods
  Vishal V. Agrawal,
  Stylianos Kavadias,
  L. Beril Toktay
  12 October 2015 | Manufacturing & Service Operations Management, Vol. 18, No. 2
- Vacations
- "Pay as You Go" or "All You Can Eat"? Pricing Methods for Computing and Information Services
- On-Demand Service Platforms
  SSRN Electronic Journal, Vol. 15
- Pricing strategy for cloud computing: A damaged services perspective
  Decision Support Systems, Vol. 78
- Strategic Overtaking in a Monopolistic M/M/1 Queue
  IEEE Transactions on Automatic Control, Vol. 60, No. 8
- Price Commitments with Strategic Consumers: Why It Can Be Optimal to Discount More Frequently … Than Optimal
  Gérard P. Cachon,
  Pnina Feldman
  15 April 2015 | Manufacturing & Service Operations Management, Vol. 17, No. 3
- Predicting customer retention in discrete and continuous services
  3 February 2015
- Optimal Three-Part Tariff Plans
  SSRN Electronic Journal, Vol. 99
- Pricing Diagnosis-Based Services When Customers Exhibit Sunk Cost Bias
  SSRN Electronic Journal, Vol. 125
- Pricing Ancillary Service Subscriptions
  SSRN Electronic Journal, Vol. 59
- Contracts, Biases, and Consumption of Access Services
  Stephen Leider,
  Özge Şahin
  17 July 2014 | Management Science, Vol. 60, No. 9
- Pricing in Queues Without Demand Information
  Moshe Haviv,
  Ramandeep S. Randhawa
  29 April 2014 | Manufacturing & Service Operations Management, Vol. 16, No. 3
- Pricing and Operational Performance in Discretionary Services
  1 April 2014 | Production and Operations Management, Vol. 23, No. 4
- Optimal Per‐Use Rentals and Sales of Durable Products and Their Distinct Roles in Price Discrimination
  1 March 2014 | Production and Operations Management, Vol. 23, No. 3
- A Model of Rational Retrials in Queues
  SSRN Electronic Journal, Vol. 4
- An Equilibrium Model of Online Shopping Supply Chain Networks with Service Capacity Investment
  Yihong Hu,
  Qiang Qiang
  12 June 2013 | Service Science, Vol. 5, No. 3
- Implications of Hyperbolic Discounting for Optimal Pricing and Scheduling of Unpleasant Services That Generate Future Benefits
  Erica L. Plambeck,
  Qiong Wang,
  18 March 2013 | Management Science, Vol. 59, No. 8
- Guilt by Association: Strategic Failure Prevention and Recovery Capacity Investments
  Sang-Hyun Kim,
  Brian Tomlin,
  15 February 2013 | Management Science, Vol. 59, No. 7
- Price Commitments with Strategic Consumers: Why it Can Be Optimal to Discount More Frequently ... Than Optimal
  SSRN Electronic Journal, Vol. 14
- Game theoretic analysis of customer subscription decisions in networks with positive externality
- Pricing schemes for congestion-prone service facilities
  Operations Research Letters, Vol. 40, No. 6
- Cutting in Line: Social Norms in Queues
  Gad Allon,
  Eran Hanany,
  28 October 2011 | Management Science, Vol. 58, No. 3
- Pricing in Queues without Demand Information
  SSRN Electronic Journal, Vol. 15
- Contracts, Biases and Consumption of Access Services
  SSRN Electronic Journal, Vol. 35
- Would the Social Planner Let Bags Fly Free?
  SSRN Electronic Journal, Vol. 2

cover image Manufacturing & Service Operations Management

Volume 13, Issue 2

Spring 2011

Pages 145-280

Article Information

Supplemental Material

Metrics

Information

Received:June 18, 2008
Accepted:July 28, 2010
Published Online:January 21, 2011

Cite as

Gérard P. Cachon, Pnina Feldman, (2011) Pricing Services Subject to Congestion: Charge Per-Use Fees or Sell Subscriptions?. Manufacturing & Service Operations Management 13(2):244-260.

https://doi.org/10.1287/msom.1100.0315

Keywords

PDF download

Available Issues

Available Issues

Available Issues

Available Issues

Available Issues

Pricing Services Subject to Congestion: Charge Per-Use Fees or Sell Subscriptions?

Supplemental Material

Volume 13, Issue 2

Article Information

Supplemental Material

Metrics

Information

Cite as

Keywords

Sign Up for INFORMS Publications Updates and News