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Pricing and delivery-time performance in a competitive environment. (English) Zbl 0805.90031
Summary: We present a model 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. We then study 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, enjoy a larger market share when its opponent also has adequate processing rate to serve all the customers alone.

91B26 Auctions, bargaining, bidding and selling, and other market models
90B22 Queues and service in operations research
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