Measuring the Effect of Queues on Customer Purchases
Coauthor(s): Yina Lu, Andrés Musalem, Ariel Schilkrut.
Adobe Acrobat PDF
Capacity decisions in service operations often involve a trade-off between operating cost and the
level of service offered to customers. Although the cost of attaining a pre-specified level of service has
been well-studied, there isn't much research studying how customer service levels affect revenue and
profit. This paper conducts an empirical study to analyze how waiting in a queue in the context of a
retail store affects customer purchasing behavior. Our methodology uses a novel technology based on
digital imaging to record periodic information about the queuing system. Our econometric methodology
integrates these data with point-of-sales information to estimate the effect of queues on purchases.
We find that waiting in queue has a non-linear effect on purchase incidence and that customers appear
to primarily focus on the length of the queue rather than the actual expected wait when making their
purchase decisions. We also find that customer sensitivity to waiting is heterogeneous and negatively
correlated with price sensitivity. We discuss implications of these results in the context of service design
and category pricing.
Source: Working paper
Lu, Yina, Marcelo Olivares, Andrés Musalem, and Ariel Schilkrut. "Measuring the Effect of Queues on Customer Purchases." Working paper, Columbia Business School, May 24, 2011.