Price Discovery in Waiting Lists
55 Pages Posted: 22 Aug 2022 Last revised: 24 Aug 2022
Date Written: August 23, 2022
Abstract
Waiting lists offer agents a choice between types of items with associated nonmonetary prices given by required waiting times. These nonmonetary prices are endogenously determined by a tâtonnement-like price discovery process: an item's price increases when an agent queues for it, and decreases when an item arrives and is assigned to a queuing agent. We show that a waiting list's price discovery process generates waiting times that fluctuate around market-clearing prices. We bound the loss from these price fluctuations by the granularity of price adjustments. The technical approach and intuition for the results relies on a connection between price adjustments in the waiting list and the stochastic gradient descent optimization algorithm. We further show that this simple price discovery process is asymptotically optimal if the granularity of price adjustments optimally balances between the adaptivity and the rigidity of the price discovery process.
Keywords: Price discovery, waiting lists, assignment problem, market-clearing prices, tâtonnement, stochastic gradient descent
JEL Classification: D47, E3, D61
Suggested Citation: Suggested Citation