Waiting Costs Research Articles

Contractual distortions in a market with frictions

This paper analyses contract design in a decentralized market environment with frictions. While principals (e.g., firms) have all contractual power, their market power is constrained as agents (e.g., workers) can choose to wait and search for better offers. We find that results depend crucially on how market frictions affect agents’ utilities. With type-independent costs of search and waiting, equilibrium contracts are always first-best. If agents are impatient and discount future payoffs, however, distortions vanish only gradually. In the latter case, we also characterize equilibrium offers and show that the market exhibits two types of externalities, both of which are absent in the case of type-independent costs of search.

Price Competition of Make-to-Order Firms

In recent years, there has been considerable research on price competition in a market where customers are sensitive to production or service delays. Most of these works assume identical firms with only different service speeds (capacities), and find that the firm with the higher speed can usually charge a premium price and take a larger market share. We consider the (non-cooperative) competition of two make-to-order firms. In addition to different service capacities, the competing firms may provide different values of service, and have firm-dependent unit costs of waiting. We obtain sufficient conditions for the existence of a Nash equilibrium, and we characterize the equilibrium analytically for some cases and numerically for some other cases. Our results confirm that the firm with the higher speed of service can usually charge a premium price and does take a larger market share. In addition, we find that the firm with the higher value of service and lower cost of waiting can usually charge a premium price and also take a larger market share. However, we do find cases where the faster (while otherwise identical) firm may charge a lower price, or take a smaller market share, or even generate less profit. In response to an increase in its service capacity, a firm may either raise or cut its optimal price, even though a higher service capacity always leads to a shorter expected waiting time. The firm may either raise or cut its price in response to a hike in its unit waiting cost.

Optimizing the service configuration with the least total cost approach

Presents an approach to optimize the service configurations of a student canteen utilizing computer simulation and a total cost function that incorporates both the cost of services and the cost of waiting. The cost of waiting is measured in terms of the impact of waiting on the customer satisfaction and the resulting changes in future repurchases. By collecting data of waiting time and customer satisfaction from a student canteen, first evaluates the impact of waiting time on customer satisfaction and future purchase frequency. Subsequently develops a simulation model to simulate the service processes and waiting line behavior at the student canteen. By varying the number of servers at the two different stages of services and calculating the total cost per customer served, the performance of the system was optimized considering both the service cost and the cost of waiting in term of its impact on future purchases. The approach presented can be used with modification in designing service configurations for a variety of service organizations.

Groups, the Media, Agency Waiting Costs, and FDA Drug Approval

political control of the bureaucracy, drug approval times appear insensitive to shifts in the partisanship or ideology of congressional majorities, oversight committees, and presidents. Controlling for numerous clinical factors, FDA review times are decreasing in (1) the wealth of the richest organization representing the disease treated by the drug, (2) me? dia coverage given to this disease, and (3) a nonlinear function of the number of groups representing this disease. Political influence over drug approval operates primarily through salience signals transmitted by groups and the media.

Strategic behavior in a service industry

AbstractA model of service duopoly is formulated, where the arrival of customers and their service time in the firm are stochastic. The firms first choose the service capacity, and given the capacity they then choose the price in a Bertrand competition. Capacity choices have a negative externality on the competitor, since increased capacity in one firm decreases its expected full price (price plus cost of waiting) and leads to a flow of customers from the other firm. If the firms choose capacities strategically, it is optimal to underinvest compared to the non‐strategic case, but this result may arise in different ways. By underinvesting the firms commit themselves to longer queues (lower quality) to relax price competition. Copyright © 2002 John Wiley & Sons, Ltd.

Scheduling and Sequencing Arrivals to an Appointment System

The authors develop methods for optimally scheduling and sequencing customer arrivals to a single-server appointment system. Customers are characterized by probabilistic service times with distinct distributions, and the server works according to a first-come, first-served discipline. A customer may fail to show for an appointment with known probability, but all arriving customers are assumed to be punctual. Costs are incurred at a specified rate per unit time that each customer waits for service, and an additional cost is incurred for every unit of time that the server operates beyond a scheduled closing time. The objective is to minimize the combined costs of customer waiting and server overtime. Possible applications include scheduling surgeons to operating suites, scheduling military aircraft to training ranges, and scheduling service activities for telecommunication technicians.

Editorial

This paper investigates replanning strategies for container-transportation task allocation of autonomous Straddle Carriers (SC) at automated container terminals. The strategies address the problem of large-scale scheduling in the context of uncertainty (especially uncertainty associated with unexpected events such as the arrival of a new task). Two rescheduling policies–Rescheduling New arrival Jobs (RNJ) policy and Rescheduling Combination of new and unexecuted Jobs (RCJ) policy–are presented and compared for long-term Autonomous SC Scheduling (ASCS) under the uncertainty of new job arrival. The long-term performance of the two rescheduling policies is evaluated using a multi-objective cost function (i.e., the sum of the costs of SC travelling, SC waiting, and delay of finishing high-priority jobs). This evaluation is conducted based on two different ASCS solving algorithms–an exact algorithm (i.e., branch-and-bound with column generation (BBCG) algorithm) and an approximate algorithm (i.e., auction algorithm)–to get the schedule of each short-term planning for the policy. Based on the map of an actual fully-automated container terminal, simulation and comparative results demonstrate the quality advantage of the RCJ policy compared with the RNJ policy for task allocation of autonomous straddle carriers under uncertainty. Long-term testing results also show that although the auction algorithm is much more efficient than the BBCG algorithm for practical applications, it is not effective enough, even when employed by the superior RCJ policy, to achieve high-quality scheduling of autonomous SCs at the container terminals.

A dynamic model of mating behavior in digger wasps: the energetics of male-male competition mimic size-dependent thermal constraints

I develop a state-based dynamic model of behavior to demonstrate that size-dependent differences in temperature tolerances are not necessary to account for the activity of small male digger wasps late in the day. In the model, males defend or patrol the nesting area, wait near nests, or feed away from the nesting area depending on time of day, energy reserves and size rank. I assume a large male competitive advantage, so mating opportunities decrease with size rank for territorial or patrolling males and are rare for all waiting males; the costs of patrolling or defense are higher than the costs of waiting. If energy reserves of all males are initially small, all males alternate feeding and territorial or patrolling behavior. If energy reserves are initially large, large males patrol or maintain territories until they risk starvation and leave the area to feed. At this time, smaller males that have conserved their resources by waiting and feeding may defend territories or patrol. I simulate the behavior of three populations representing two species of Microbembex by assuming large initial energy reserves for populations in which males were territorial and small initial reserves for populations in which males patrolled, and then convert the predicted time of activity to temperature using local regressions from field studies. Temporal patterns in the activity of large and small males were similar to those actually observed, and relationships between size and temperature predicted by the model corresponded to most observations and were sometimes positive. Thus, the delayed activity of smaller males does not correspond to activity at higher temperatures and is probably not attributable to size-dependent thermal tolerances, but may represent a temporal displacement of mating activity due to intra-sexual competition and mediated by energetics. The model makes testable predictions on the timing of feeding and depletion of energy reserves in relation to size and initial energy state, and suggests how differences among species may influence the temporal and spatial organization of male mating behavior.

Cost Consequences of Surveillance, Medical Management or Surgery for Benign Prostatic Hyperplasia

Purpose The cost consequences of alternative treatment modalities for benign prostatic hyperplasia (BPH) were investigated. The present lifetime costs of watchful waiting, medical management and surgery alone and in various combinations were estimated for a synthetic cohort of men comprised of 5 age groupings. Materials and Methods Synthetic cohort models were constructed to follow men at different ages “analytically” for specific intervals and to calculate the cumulative health care costs associated with alternative BPH treatment regimens during those periods. These models accounted explicitly for survival probabilities, the use of different types of health care services and products, price changes for those services and products, failure rates of some therapies and a discount factor needed to compute the present value of the cost streams. The models were implemented with hospital discharge and other data on BPH incident cases in the state of Florida in approximately 1989. Results The addition of medical management to the mix of therapies is likely to increase overall health care spending on BPH treatment, perhaps by a considerable amount. The cost-effectiveness of each type of BPH therapy differs by the age of the patient at which it is first initiated. All other parameters being equal, surgery appears to be more cost-effective at younger patient ages, while medical management has a cost advantage at older ages. Conclusions The cost implications of alternative BPH therapies are substantial, and warrant more detailed consideration by clinicians and health policy specialists.

Transit Equilibrium Assignment: A Model and Solution Algorithms

In this paper we propose a model for the transit equilibrium assignment problem (TEAP) and develop two algorithms for its solution. The behavior of the transit users is modeled by using the concept of hyperpaths (strategies) on an appropriate network (general network) which is obtained from the road network and the transit lines by a transformation which makes explicit the walk, wait, in-vehicle, transfer and alight arcs. The waiting (generalized) cost is a function of both frequency of the transit lines and congestion effects due to queues at stops. The TEAP is stated and formulated as a variational inequality problem, in the space of hyperpath flows, and then solved by the linearized Jacobi method and the projection method. We prove the global convergence of these two algorithms for strongly monotone arc cost mappings. The implementation of the algorithms and computational experiments are presented as well.

Scheduling arrivals to a queue

We obtain an optimal spacing for arrivals to a single server queue with exponential service time. This is a continuation of work by Jansson [2], Mercer [3] and Pegden and Rosenshine [1]. Pegden and Rosenshine determined spacings minimizing the sum of the expected costs of customer waiting and server availability. We also determine the optimal solution for equally spaced arrivals. For a large number of customers to be scheduled, n, we show the equally spaced model is a limiting case of the model of Pegden and Rosenshine. This provides a simple large n approximation which avoids considerable computation.

Quantifying opportunity costs associated with adding manufacturing flexibility

SUMMARY Opportunity costs associated with adding manufacturing flexibility are one of the most important manufacturing performance measures of factory automation. Opportunity costs consist of the nonconventional costs of set-up, part waiting, equipment idle and inventory, which measure product, process, equipment and demand flexibility, respectively. The nonconventional costs are estimated using a computer simulation. An example shows the cost estimation procedure.

Rationing by Waiting and the Value of Time: Results from a Natural Experiment

The authors analyze data from a natural experiment with rationing by waiting. In the situation, motorists were confronted with a choice between waiting in line for low-priced gasoline or purchasing at a higher price without waiting. They view this as a revealed preference experiment and use their choices to estimate the value of time spent waiting as a function of individual characteristics. In most cases the estimates of the value of time are quite similar to individuals' after-tax wages. 13 references, 7 tables.

On Competition to Join a Simple Queueing System Before the Facility Opens

A single server provides FIFO services commencing at time 0. Each member of a population of N potential customers must decide whether or not to arrive at the facility. Customers choosing to arrive must do so no later than time 0. This paper studies the benefit to customers: the value of service received minus the cost of waiting time. This model is studied under a variety of assumptions and the impact of customer behavior on average benefit (value of service minus cost of waiting) is examined. Self-interested customers compete with each other (by arriving sufficiently early) to the extent that much of the potential benefit is dissipated through high waiting costs before time 0. A common finding is that no customer can attain a benefit which improves on that which would result from arriving exactly at time 0 and being last in line. The impact of charging entrance tolls is investigated.

Cost of Waiting, Risk, and Individual Action: The Case of Public Housing

In this paper the concept of waiting time for public housing is explored; the individual's decisionmaking process on whether to join the housing queue is modeled; how long he/she is prepared to wait for public housing is assessed; a methodology to evaluate the cost of this waiting time is proposed; and estimates of some likely values of this cost are made. The cost of waiting is of more than esoteric interest, impinging on several questions of policy, such as the use of waiting times as indicators in assessing need, the sale of council housing, and the efficiency of a nonprice method of resource allocation. The model predicts the maximum length of time a person will be prepared to wait, given his/her life expectancy in the authority's house, the relative cost to the person of alternative housing, and his/her time-preference rate. Risk preferences are also incorporated to assess the ‘risk premium’: The extra cost a person would sacrifice to be certain of obtaining public housing at a specified time. Estimates of the cost of waiting are derived from the model and also from a questionnaire survey of housing waiting-list applicants in North Tyneside Metropolitan Borough.

Optimal Strategies for Selling an Asset

This paper considers the problem of selling an asset on the open market. The seller receives a random sequence of price offers, which may arrive either periodically or randomly over time. After each offer is received, the seller must decide whether or not to sell, weighing the possibility of obtaining a better offer against the cost of waiting. A number of authors have established the properties of optimal selling policies when the distribution of offers is known and offers are received periodically. This paper investigates the conditions under which these same properties hold for an unknown offer distribution which is updated as successive offers are received.

Rent Seeking, Noncompensated Transfers, and Laws of Succession

My purpose in this paper is to analyze inefficiencies that may emerge from the noncompensated transfer of valued rights among persons. This source of inefficiency has not, to my knowledge, been fully incorporated either in the economic theory of property rights or in orthodox tax analysis. My discussion is based on the elementary fact that all noncompensated transfers are rents to the recipients. Implications for the emergence of rent-seeking behavior follow straightforwardly. The now-familiar propositions to the effect that rent seeking may dissipate economic value can be applied to a variety of transfer settings, only a few of which are explored in this paper.1 To the extent that the efficiency criterion is the relevant norm, direct implications may be drawn for policy with respect to the laws or rules for succession.

Flow-Shop Sequencing with no Intratnachine Waiting: Minimization of Total Waiting Cost

This paper solves a n×m flow-shop sequencing problem with the restriction that a job once starts processing on the first machine will be continuously processed on the remaining machines without any waiting between two successive machines. Minimization of the sum of waiting costs of all the jobs is taken as the criterion to be optimized.

Control Strategies for Transport Systems with Nonlinear Waiting Costs

The interaction between a transport company and its passengers is modeled as a cooperative game in which the company, subject to an economic constraint, uses the vehicle dispatch strategy under which a time-related cast function for passengers is minimized. A rudimentary transport system is studied in detail, and the joint optimal strategy for passengers and the transport company is obtained.

Allocation Processes with Variable Channel Queues

A dynamic model is formulated for determining optimum operating policies in a variable channel queuing situation. Such policies are required when workers must be allocated to one of several jobs which have associated with them different waiting costs. In this model, two such jobs are considered: (a) a “queue job” i.e., serving customers in a queue, and (b) performing another task which does not involve waiting customers (called “fixed work”). The criterion of the model is a minimization of the sum of these costs: the cost of customer waiting, the cost of fixed work, and the cost of changing tasks. Decision rules involving the assignment of workers depended upon the number of waiting customers, the anticipated arrival pattern, and the amount of uncompleted fixed work remaining. The model was run using arrival and service data obtained from a medium sized suburban bank together with implicitly derived cost data.