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Herding in Queues with Waiting Costs: Rationality and Regret

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  • Senthil K. Veeraraghavan

    () (The Wharton School, University of Pennsylvania, Philadelphia, Pennsylvania 19104)

  • Laurens G. Debo

    () (Chicago Booth School of Business, University of Chicago, Chicago, Illinois 60637)

Abstract

We study how consumers with waiting cost disutility choose between two congested services of unknown service value. Consumers observe an imperfect private signal indicating which service facility may provide better service value as well as the queue lengths at the service facilities before making their choice. If more consumers choose the same service facility because of their private information, longer queues will form at that facility and indicate higher quality. On the other hand, a long queue also implies more waiting time. We characterize the equilibrium queue-joining behavior of arriving consumers and the extent of their learning from the queue information in the presence of such positive and negative externalities. We find that when the arrival rates are low , utility-maximizing rational consumers herd and join the longer queue, ignoring any contrary private information. We show that even when consumers treat queues as independently evolving, herd behavior persists with consumers joining longer queues above a threshold queue difference. However, if the consumers seek to minimize ex post regret when making their decisions, herd behavior may be dampened.

Suggested Citation

  • Senthil K. Veeraraghavan & Laurens G. Debo, 2011. "Herding in Queues with Waiting Costs: Rationality and Regret," Manufacturing & Service Operations Management, INFORMS, vol. 13(3), pages 329-346, July.
  • Handle: RePEc:inm:ormsom:v:13:y:2011:i:3:p:329-346
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    File URL: http://dx.doi.org/10.1287/msom.1100.0322
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    References listed on IDEAS

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    Cited by:

    1. Eyster, Erik & Galeotti, Andrea & Kartik, Navin & Rabin, Matthew, 2014. "Congested observational learning," Games and Economic Behavior, Elsevier, vol. 87(C), pages 519-538.

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