Price Differentiation in Segmented Waiting-Line Systems

In a segmented waiting-line system, customers are segmented into two groups: those who are willing to wait for service and those who are willing to pay a premium to avoid a long wait. The use of waiting line segmentation has been shown to result in increased profit for the company or organization, increased employment, less waiting for customers, and increased customer satisfaction. In a segmented waiting-line system, deciding upon a price to charge customers in the “premium” waiting line is still something more of an art than a science and the amount of the premium will vary widely from one industry/ organization to another. This paper addresses the potential problems and pitfalls in, and makes some recommendations toward, determining the size of the premium that will result in optimal efficiency for a segmented waiting-line system