The Economics of Line-Sitting
Forthcoming, Management Science
58 Pages Posted: 16 Feb 2018 Last revised: 26 Dec 2019
Date Written: February 1, 2018
This paper studies an emerging business model of line-sitting in which customers seeking service can hire others (line-sitters) to wait in line on behalf of them. We develop a queueing-game-theoretic model that captures the interaction among customers, the line-sitting firm, and the service provider to examine the impact of line-sitting on the service provider's revenue and customer welfare. We also contrast line-sitting with the well-known priority purchasing scheme as both allow customers to pay extra to skip the wait. Our main results are as follows. First, we find that both accommodating line-sitting and selling priority can bring in extra revenue for the service provider, although by different means---selling priority increases revenue mainly by allowing the service provider to practice price discrimination that extracts more customer surplus, whereas line-sitting does so through demand expansion, attracting customers who would not otherwise join. Second, the priority purchasing scheme tends to make the customer population worse off while line-sitting can be a win-win proposition for both the service provider and the customers. Nevertheless, having the additional option of hiring line-sitters does not always benefit customers as a whole because the demand expansion effect also induces negative congestion externalities. Finally, despite the fact that the service provider collects the priority payment as revenue but not the line-sitting payment, which accrues to the third-party line-sitting firm, we demonstrate that, somewhat surprisingly, accommodating line-sitting can raise more revenue for the service provider than directly selling priority.
Keywords: service operations, queueing games, line-sitting, priority, pricing, revenue, customer welfare
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