Abstract: Due to customer heterogeneity (waiting costs per unit time are different), service providers usually introduce classification service to customers. However, when customers choose to enter a queuing system, they tend to have an expectation on waiting time in psychology, which will influence customers’ behavioral and lead to the flow of customers in the queuing system, which will affect the revenue of service providers. In this paper, the customer heterogeneity and classification service based on a stylized non-preemptive M/M/1 system are considered, and the priority pricing for maximizing the revenue of service provider is studied when customers have expectation on waiting time. First, the impact of the expectation waiting time of the priority customer is analyzed on the revenue and the corresponding priority pricing, and then the influence of the expectation waiting times of both the priority customers and the regular customers is studied on revenue and the related priority pricing. The findings of this paper are as follows: When only priority customers hold an expectation waiting time in queuing, the service providers should increase the priority pricing based on the expectation waiting time of the priority customer to achieve more revenue. When both the priority customers and the regular customers hold an expectation waiting time in queuing, the service providers still should enhance the priority pricing based on the expectation waiting time of the priority customer to increase revenue. However, if the basic fee for regular customers to obtain service is small or the service provider pays more attention to the revenue of one-time consumption by customers, then the service provider should reduce the proportion of regular customers and increase the proportion of priority customers in the system by utilizing the expectation waiting time of regular customers for getting more revenue; if the basic fee for regular customers to obtain services is high, the service provider pays more attention to the revenue of multiple consumption by regular customers or the service providers value regular customers, then the expectation waiting time of regular customers causes corporate revenue to continue to decline. At this time, if the service provider can adopt a discount strategy (certain discount strength) for high-value regular customers, and improve their satisfaction, and eliminate their psychological expectation of waiting time, it can further increase the revenue. The findings provide significant and practical insights for service providers who value the expected waiting time of customers in service pricing.

Key words: queuing theory；expected waiting time；revenue management；priority pricing；optimization