Paying for Express Checkout: Competition and Price Discrimination in Multi-Server Queuing Systems

PLoS ONE, Vol. 9(3), 2014

33 Pages Posted: 21 Nov 2013 Last revised: 20 May 2015

See all articles by Cary A. Deck

Cary A. Deck

University of Alabama - Department of Economics, Finance and Legal Studies

Erik O. Kimbrough

Chapman University - The George L. Argyros School of Business & Economics

Steeve Mongrain

Simon Fraser University (SFU) - Department of Economics

Date Written: November 21, 2013

Abstract

We model competition between two firms selling identical goods to customers who arrive in the market stochastically. Shoppers choose where to purchase based upon both price and the time cost associated with waiting for service. One seller provides two separate queues, each with its own server, while the other seller has a single queue and server. We explore the market impact of the multi-server seller engaging in waiting cost based price discrimination by charging a premium for express checkout. Specifically, we analyze this situation computationally and through the use of controlled laboratory experiments. Somewhat surprisingly, we find that this form of price discrimination is harmful to sellers and beneficial to consumers. When the two-queue seller offers express checkout for impatient customers, the single queue seller focuses on the patient shoppers thereby driving down prices and profits while increasing consumer surplus.

Keywords: Queue Pricing, Retail Markets, Price Discrimination, Laboratory Experiments

JEL Classification: C9, D4, D6, L2, L8

Suggested Citation

Deck, Cary A. and Kimbrough, Erik O. and Mongrain, Steeve, Paying for Express Checkout: Competition and Price Discrimination in Multi-Server Queuing Systems (November 21, 2013). PLoS ONE, Vol. 9(3), 2014. Available at SSRN: https://ssrn.com/abstract=2357807 or http://dx.doi.org/10.2139/ssrn.2357807

Cary A. Deck

University of Alabama - Department of Economics, Finance and Legal Studies ( email )

P.O. Box 870244
Tuscaloosa, AL 35487
United States

Erik O. Kimbrough (Contact Author)

Chapman University - The George L. Argyros School of Business & Economics ( email )

One University Dr
Orange, CA 92866
United States

Steeve Mongrain

Simon Fraser University (SFU) - Department of Economics ( email )

8888 University Drive
Burnaby, British Columbia V5A 1S6
Canada
604-291-3547 (Phone)
604-291-5944 (Fax)

HOME PAGE: http://www.sfu.ca/~mongrain/

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