The Economics of Queues and Waiting
Money Versus Time: Two Ways to Ration
Goods can be rationed by price or by waiting, and each has different fairness and efficiency effects.
Who gets served?
Price rationing
Higher prices reduce demand, and those who value the service most pay.
Queue rationing
Those with lowest value of time wait, and those who cannot afford to wait give up.
Trade-offs
Queues can seem fairer, but waste time; prices can be efficient but exclude the poor.
Hybrid
Many services offer both, such as a fast lane for a fee.
Tatkal tickets
Railways charge a higher price for last-minute booking, rationing by price.
Assuming queues are automatically fair
A rich person can pay someone to stand in line.
Key takeaways
- Rationing can use price or time.
- Price favours those who can pay.
- Queues cost time.
- Hybrids are common.
No recording for this one yet - EconReader can read it aloud for you.