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Paying for express checkout: competition and price discrimination in multi-server queuing systems
Cary Deck1, Erik O Kimbrough2, Steeve Mongrain2
1Department of Economics, University of Arkansas, Fayetteville, Arkansas, United States of America.
Plos One
|March 27, 2014
Summary
Price discrimination through express checkout harms sellers but benefits consumers. A multi-server firm offering premium service leads to lower prices and profits for competitors, increasing consumer surplus.
Area of Science:
- Business and Economics
- Marketing Strategy
- Operations Management
Background:
- Consumer choice is influenced by price and waiting time costs.
- Firms compete by managing service queues and pricing strategies.
- Price discrimination can be implemented based on customer impatience.
Purpose of the Study:
- To analyze the market impact of price discrimination by a multi-server firm.
- To investigate the effects of express checkout services on market competition.
- To evaluate the outcomes for both sellers and consumers.
Main Methods:
- Computational modeling of market dynamics.
- Controlled laboratory experiments with consumer behavior.
- Analysis of pricing strategies and queue management.
Main Results:
- Price discrimination via express checkout negatively impacts seller profits.
- Consumers benefit from increased consumer surplus due to this strategy.
- Market competition intensifies, leading to lower prices and reduced profits for single-queue sellers.
Conclusions:
- Express checkout services can be detrimental to firms engaging in price discrimination.
- This strategy enhances consumer welfare by lowering overall market prices.
- Market structure and firm strategies significantly influence competitive outcomes and profitability.
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