Optimal decision making in a maintenance service operation

In recent years, there has been a dramatic increase in the out sourcing of equipment maintenance with the maintenance being carried out by an external agent rather than in-house. Often, the agent offers more than one option and the owners of equipment (customers) are faced with the problem of selecting the optimal option. The optimal choice depends on their attitude to risk and the parameters of the different options. The agent needs to take these issues into account in the optimal selection of the parameters for the different options and this requires a game theoretic formulation. The papers deals with one such model formulation to determine the agent's optimal strategy with regards the pricing structure, the number of customers to service and the number of service channels. (C) 1999 Elsevier Science B.V. All rights reserved.