This paper considers an M/M/1 queueing system with dynamically controlled a
rrival and service rates. At each arrival or service completion epoch, a de
cision maker chooses a pair of arrival and service rates from a finite set,
and the system operates under these rates until the next arrival or servic
e completion. There is a switching cost for changing the rates, and there i
s a cost per unit time of holding customers and using the arrival and servi
ce rates. The results describe natural conditions on the costs under which
an optimal policy for either the discounted-cost or average-cost criterion
is a hysteretic policy. Such a policy increases the service rate and decrea
ses the arrival rate as the queue length increases. Furthermore, the contro
l exhibits a stickiness or resistance to change, called hysteresis, due to
the switching costs.