Title: Pricing and Delivery-Time Performance in a Competitive Environment
Abstract: We present a model of market competition in which customer preferences are over not only price and quality but also delivery speed. This allows a study of market demand and firms' decisions on price, quality, technology and responsiveness in a competitive environment. When demand arises, a customer chooses the firm that maximizes its expected utility of price, quality and response time. The demand function for each firm is derived by analyzing a queueing system with competing servers. We then study price competition among firms with differentiated processing rates. In the equilibrium, the firm with a higher processing rate always enjoys a price premium, and, further, enjoys a larger market share when its opponent also has adequate processing rate to serve all the customers alone.
Publication Year: 1994
Publication Date: 1994-05-01
Language: en
Type: article
Indexed In: ['crossref']
Access and Citation
Cited By Count: 203
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