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A Queuing Model of Price Determination in a Competitive Market

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  • Michael Sattinger

Abstract

This paper addresses the question of how prices change in a competitive market if all agents are price takers. A queuing model of price determination is developed in which buyers and sellers face trade-offs between price and expected wait times. Sellers set prices but are competitive in the sense that they are "value takers" and cannot affect the value of the combination of price and wait time. The queuing market yields realistic outcomes of price dispersion and moderate price response to demand shocks. Disequilibrium has limited consequences for a queuing market.

Suggested Citation

  • Michael Sattinger, 1998. "A Queuing Model of Price Determination in a Competitive Market," Discussion Papers 98-08, University at Albany, SUNY, Department of Economics.
  • Handle: RePEc:nya:albaec:98-08
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