Paying for express checkout: competition and price discrimination in multi-server queuing systems

PLoS One. 2014 Mar 25;9(3):e92070. doi: 10.1371/journal.pone.0092070. eCollection 2014.

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. 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.

Publication types

  • Research Support, Non-U.S. Gov't

MeSH terms

  • Choice Behavior*
  • Commerce / economics*
  • Commerce / organization & administration
  • Economic Competition*
  • Fees and Charges
  • Humans
  • Marketing / economics*
  • Marketing / organization & administration
  • Models, Theoretical*
  • Time Factors

Grants and funding

Research Support from the Center for Retailing Excellence at the Sam M. Walton College of Business is gratefully acknowledged. The funders had no role in study design, data collection and analysis, decision to publish, or preparation of the manuscript.