Monopoly Pricing When Customers Queue
Posted: 25 Aug 1998
It takes time to process purchases and as a result a queue of customers may form. The pricing and service rate decisions 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.
JEL Classification: L12, L15
Suggested Citation: Suggested Citation