It is Not How Long it is, But How You Make it Long - Waiting Lines in a Multi-Step Service Process

Ever since Naor (1969) suggested that the length of waiting traffic lines could be regulated by toll, economists have been busy trying to explain why restaurants might be reluctant to regulate customer waiting lines through differential pricing. This paper shows that in a multi-step service process, the actual length of the waiting line is often obscured by the waiting lines at each of the service points that are not observable by the outside observers. If potential customers cannot judge how long the waiting line actually is, they cannot use any pricing signals to judge whether they should join the line. Since the system manager knows where the bottlenecks are, he/she can regulate line length much better by attending to these bottlenecks directly rather than indirectly through pricing. This paper also raises a general problem of system regulation when the visible signals are not the actual signals