Equilibrium in Servicing Industries: An Economic Application of Queuing Theory
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.