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Equilibrium in Servicing Industries: An Economic Application of Queuing Theory

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  • Davidson, Carl

Abstract

The purpose of this article is to investigate the nature of equilibrium in markets in which service an d waiting time play an important role. The author shows that if consu mers do not know which firms are charging which prices, all firms cha rge the same price. If firms reveal their prices by advertising, the market separates with consumers with a high (low) cost of time buying from firms with high (low) prices and short (long) queues. If firms are allowed to advertise, they will, but they benefit from a collusiv e agreement restricting advertisement, provided the agreement is enfo rceable. Copyright 1988 by the University of Chicago.

Suggested Citation

  • Davidson, Carl, 1988. "Equilibrium in Servicing Industries: An Economic Application of Queuing Theory," The Journal of Business, University of Chicago Press, vol. 61(3), pages 347-367, July.
  • Handle: RePEc:ucp:jnlbus:v:61:y:1988:i:3:p:347-67
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    References listed on IDEAS

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    1. Simon Benninga & Marshall Blume, "undated". "On the Optimality of Portfolio Insurance," Rodney L. White Center for Financial Research Working Papers 5-85, Wharton School Rodney L. White Center for Financial Research.
    2. Sanford J. Grossman, 1977. "The Existence of Futures Markets, Noisy Rational Expectations and Informational Externalities," Review of Economic Studies, Oxford University Press, vol. 44(3), pages 431-449.
    3. Benninga, Simon & Blume, Marshall E, 1985. " On the Optimality of Portfolio Insurance," Journal of Finance, American Finance Association, vol. 40(5), pages 1341-1352, December.
    4. Simon Benninga & Marshall Blume, "undated". "On the Optimality of Portfolio Insurance," Rodney L. White Center for Financial Research Working Papers 05-85, Wharton School Rodney L. White Center for Financial Research.
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    Cited by:

    1. James G. Mulligan, 2006. "Endogenously determined Quality and Price In a Two-Sector Competitive Service Market With an Application to Down-Hill Skiing," Working Papers 06-01, University of Delaware, Department of Economics.
    2. Michael Sattinger, 2002. "A Queuing Model of the Market for Access to Trading Partners," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 43(2), pages 533-548, May.
    3. Das Nilotpal & Falaris Evangelos M & Mulligan James G, 2009. "Vintage Effects and the Diffusion of Time-Saving Technological Innovations," The B.E. Journal of Economic Analysis & Policy, De Gruyter, vol. 9(1), pages 1-37, June.
    4. James T. Moser, 2002. "The immediacy implications of exchange organization," Working Paper Series WP-02-09, Federal Reserve Bank of Chicago.
    5. Pekka Ilmakunnas, 2002. "Strategic behavior in a service industry," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 23(2), pages 69-82.
    6. James G. Mulligan & Nilotpal Das, 2005. "Persistent Adoption of Time-Saving Process Innovations," Working Papers 05-03, University of Delaware, Department of Economics.
    7. James G. Mulligan & Nilotpal Das, 2004. "Vintage Effects and the Diffusion of Time-Saving Technological Innovations: The Adoption of Optical Scanners by U.S. Supermarkets."," Working Papers 04-06, University of Delaware, Department of Economics.
    8. GĂ©rard P. Cachon & Patrick T. Harker, 2002. "Competition and Outsourcing with Scale Economies," Management Science, INFORMS, vol. 48(10), pages 1314-1333, October.
    9. Shamir Noam & Shamir Julia, 2012. "The Role of Prosecutor's Incentives in Creating Congestion in Criminal Courts," Review of Law & Economics, De Gruyter, vol. 8(3), pages 579-618, December.

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