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Monopoly Pricing When Customers Queue


  • Hong Chen

    (University of British Columbia)

  • Murray Frank

    (University of British Columbia and Hong Kong University of Science and Technology)


It takes time to process purchases and as a result a queue of customers may form. The pricing and service rate decissions of a monopolist who must take this into account are characterized. We find that an increase in the average number of customers arriving in the market either has no effect on the monopoly price, or else causes the monopolist to reduce the price in the short run. In the long run the monopolist will increase the service rate and raise the price. When customer preferences are linear the equilibrium is socially efficient. When preferences are not linear equilibrium will not normally be socially efficient.

Suggested Citation

  • Hong Chen & Murray Frank, 1995. "Monopoly Pricing When Customers Queue," Industrial Organization 9504001, EconWPA.
  • Handle: RePEc:wpa:wuwpio:9504001
    Note: 298333 bytes postscript file created with Latex. 34 page including the titlepage. Keywords: Queue, Monopoly, Customer Information, Service Rate, Social Welfare

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    Cited by:

    1. Ying Shi & Xin Li & Ping Fan, 2016. "Optimization of an M/M/∞ Queueing System with Free Experience Service," Asia-Pacific Journal of Operational Research (APJOR), World Scientific Publishing Co. Pte. Ltd., vol. 33(06), pages 1-17, December.
    2. Gérard P. Cachon & Pnina Feldman, 2011. "Pricing Services Subject to Congestion: Charge Per-Use Fees or Sell Subscriptions?," Manufacturing & Service Operations Management, INFORMS, vol. 13(2), pages 244-260, June.
    3. Krishnan S. Anand & M. Faz{i}l Paç & Senthil Veeraraghavan, 2011. "Quality-Speed Conundrum: Trade-offs in Customer-Intensive Services," Management Science, INFORMS, vol. 57(1), pages 40-56, January.
    4. Zhou, Wenhui & Lian, Zhaotong & Wu, Jinbiao, 2014. "When should service firms provide free experience service?," European Journal of Operational Research, Elsevier, vol. 234(3), pages 830-838.

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    JEL classification:

    • L - Industrial Organization


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