Equilibrium analysis of observable express service with customer choice

Jiaqi Zhou () and Ilya O. Ryzhov ()
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Jiaqi Zhou: University of Maryland
Ilya O. Ryzhov: University of Maryland

Queueing Systems: Theory and Applications, 2021, vol. 99, issue 3, No 3, 243-281

Abstract: Abstract We study a stylized queueing model motivated by paid express lanes on highways. There are two parallel, observable first-come, first-served queues with finitely many servers: one queue has a faster service rate, but charges a fee to join, and the other is free but slow. Upon arrival, customers see the state of each queue and choose between them by comparing the respective disutility of time spent waiting, subject to random shocks. This framework encompasses both the multinomial logit and exponomial customer choice models. Using a fluid limit approximation, we give a detailed characterization of the equilibrium in this system. We show that social welfare is optimized when the express queue is exactly at (but not over) full capacity; however, in some cases, revenue is maximized by artificially creating congestion in the free queue. The latter behavior is caused by changes in the price elasticity of demand as the service capacity of the free queue fills up.

Keywords: Observable queues; Endogenous arrival rates; Choice models; 60K25; 90B22 (search for similar items in EconPapers)
Date: 2021
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DOI: 10.1007/s11134-021-09720-z

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