Joining longer queues: Information externalities in queue choice
Veeraraghavan and Debo start from the point that queue length can signal either higher demand or slower service, so customers may read a long line as a sign of quality. They study this information externality when waiting costs are negligible. With equal, known service rates, joining the longer queue can be rational even when it is only one customer longer, and the market produces cycles in which one firm thrives while the other does not, depending on the private signal of the first customer to arrive when both are idle. These findings hold with several servers per facility and when a firm can exit after failing to attract customers for a while. When service rates are unknown and negatively correlated with service value, long queues are even more informative; when the correlation is positive they are less informative, and customers may join shorter queues.
Veeraraghavan and Debo start from the point that queue length can signal either higher demand or slower service, so customers may read a long line as a sign of quality. They study this information externality when waiting costs are negligible. With equal, known service rates, joining the longer queue can be rational even when it is only one customer longer, and the market produces cycles in which one firm thrives while the other does not, depending on the private signal of the first customer to arrive when both are idle. These findings hold with several servers per facility and when a firm can exit after failing to attract customers for a while. When service rates are unknown and negatively correlated with service value, long queues are even more informative; when the correlation is positive they are less informative, and customers may join shorter queues.
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Veeraraghavan, S., & Debo, L. G. (2009). Joining longer queues: Information externalities in queue choice. Manufacturing & Service Operations Management, 11(4), 543-562. doi:10.1287/msom.1080.0239