ID : 1026
Studies ; Queuing  ; Pricing ; Models ; Management science ; Deliveries ; Customer satisfaction ; Consumer behavior ; Competition
A model is presented 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.  The analysis then studies 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.
Pricing and delivery-time performance in a competitive environment, Li, Lode; Lee, Yew Sing, Management Science, 40:5, May 1994
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