Sunday, February 15, 2009

Why "queuing" exists?

This is an old but hard question. Why we still use "queuing" to allocate scarce resources almost everywhere in the world? Why don't we substitute this with many other possible mechanisms, such as auctioning, lots-drawing , seniority or even duel? More interestingly, under what circumstances can we supplant queuing by other possible means, under what other circumstances can we not?


Yao Qingtie said...

Maybe because queuing seems more fair than other ways, thus seems more accceptable. Also, the transaction cost of queuing is lower? I am not sure.

Happy Chinese New Year. Jeffry.

Jeffrey Huang said...

Thanks, Qingtie! Fairness is certainly one of the arguments. But still, why would we need fairness after all? I would also argue that since everybody would have a different reserve value for getting the service, auction also seems "fair" and moreover, it is more efficient. Of course, transaction costs are critically important, but we still have to specify what specific type of transaction cost would matter under these circumstances, say, getting a table at a restaurant? Unless the "origin" of the specific transaction cost is identified, the mere "transaction costs" argument is with no contents and hence is tautological at most.

Yao Chingteeh said... How to solve this? queuing up? drawing lottery? or auctioning? extreme scarcity in public medicare service, both at home and abroad.

Jeffrey Huang said...

Thanks for caming up with an great example. However, in order to analyze the queuing problem in a more convenient way, I would not suggest the context of receiving health care service, partly beacuse health care industry is not competitive and often regulated, hence suffering more external "constraints". Moreover, even the measurement of efficiency in this case would be much more difficult than in many other situations, for example, dining in an restaurant. Here, we cannot surely say which patient would value the service more (maybe their own preferences tend to be biased when their health is threatened, since the value of health is intrinsically difficult. The tradeoff is not paying for food now but paying for your health). This situation gets even worse when the patients don't know what kind of sicknesses they are suffering.

In china, there are actually alternative mechanisms other than queuing in order to allocate health care resources, like seniority or celebrity. Why these mechanisms exist as well? Are they efficient or fair and why?