Monopoly Pricing When Customers Queue

Posted: 25 Aug 1998

See all articles by Murray Z. Frank

Murray Z. Frank

University of Minnesota

Hong Chen

Shanghai Advanced Institute in Finance, Shanghai Jiao Tong University

Abstract

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

Frank, Murray Z. and Chen, Hong, Monopoly Pricing When Customers Queue. Available at SSRN: https://ssrn.com/abstract=6633

Murray Z. Frank (Contact Author)

University of Minnesota ( email )

Carlson School of Management
321 19th Avenue South
Minneapolis, MN 55455
United States
612-625-5678 (Phone)

Hong Chen

Shanghai Advanced Institute in Finance, Shanghai Jiao Tong University ( email )

Shanghai, 200052
China

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