Congestion-Prone Services under Quality Competition: A Microeconomic Analysis
This study presents new microeconomic analyses of congestion-prone services that comprise most private and public services at the final consumption stage. It accounts for two distinctive features of congestion-prone services: the discrepancy between capacity and throughput, and service quality competition. To accommodate these features, a series of new decision-making theorems for consumers and suppliers is developed. The resulting demand and cost functions incorporate service time as the variable that reflects congestion and service quality. In market equilibrium, interactions between consumers and firms endogenously determine the industrial organization type of each firm and thus allow the coexistence of multiple industrial organization types in the same market. Efficiency of resource allocation is assessed by applying two different criteria: service quality diversity throughout the market and Pareto optimality in each submarket.
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Chapter 1 Introduction Preview of Analysis Approaches
Part I Service Demand of Consumers
Part II Cost Analyses for CongestionProne Service Systems
Part III Decisions of CongestionProne Service Firms
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analyses Assumption basic choice problem capacity cost catchment domain congestion constraint consumer cost function cost minimization problem decrease demand function denoted depicts differentiated equals equation estimated expressed ﬁrst formulated hedonic commodities Hence identical ordering condition implicit price implies indifference curve innovative service inputs integral domain Lemma marginal cost marginal full cost marginal revenue market equilibrium mode choice multiple net-value-of-time optimal capacity option mn Pareto optimality perfectly elastic demand price and capacity prime commodity private services production function Proof public service qualitative attributes qualitative choice problems qualitative competition quantitative random perception approach resource allocation efficiency respect revealed preference condition satisﬁes SBCP service firm service markets service quality service time function social marginal social welfare social welfare function solution submarket subsection substitute SWMP Theorem throughput user equilibrium approach user equilibrium condition utility utility maximization problem variables vector