In many service industries, companies compete with each other on the basis of the waiting time their customers experience, along with other strategic instruments such as the price they charge for their service. The objective of this paper is to conduct an empirical study of an important industry to measure to what extent waiting time performance impacts different firms' market shares and price decisions. We report on a large-scale empirical industrial organization study in which the demand equations for fast-food drive-thru restaurants in Cook County are estimated based on so-called structural estimation methods. Our results confirm the belief expressed by industry experts, that in the fast-food drive-thru industry customers trade off price and waiting time. More interestingly, our estimates indicate that consumers attribute a very high cost to the time they spend waiting.
I n this paper, we postulate a general class of price competition models with mixed multinomial logit demand functions under affine cost functions. In these models, the market is partitioned into a finite set of market segments. We characterize the equilibrium behavior of this class of models in the case where each product in the market is sold by a separate, independent firm. We identify a simple and very broadly satisfied condition under which a pure Nash equilibrium exists and the set of Nash equilibria coincides with the solutions of the system of first-order-condition equations, a property of essential importance to empirical studies. This condition specifies that in every market segment, each firm captures less than 50% of the potential customer population when pricing at a specific level that, under the condition, is an upper bound for a rational price choice for the firm irrespective of the competitors' prices. We show that under a somewhat stronger, but still broadly satisfied, version of the above condition, a unique equilibrium exists. We complete the picture by establishing the existence of a Nash equilibrium, indeed a unique Nash equilibrium, for markets with an arbitrary degree of concentration, under sufficiently tight price bounds. We discuss how our results extend to a continuum of customer types. A discussion of the multiproduct case is included. The paper concludes with a discussion of implications for structural estimation methods.
As the naval engineering community struggles with initiatives of reduced manning, computer integration, and use of commercial standards, many new technological advances are helping to make these changes possible. There are, however, areas of shipboard operations and engineering where the use of “old technology” used in conjunction with “new philosophies and configurations” are just as important; shipboard fire protection is one such consideration. Fire protection on the strategic SEALIFT LMSR (large medium speed RO/RO) ships is accomplished by the use of structural fire protection, fire zoning, detection and alarm systems, and suppression systems. These systems blend passive and active operation, which resulted from an extensive evolutionary process, starting with the operational requirements document (ORD) and has continued through installation, testing, and commissioning. This paper will concentrate on the largest and at times the most debated of these systems: the cargo hold foam fire protection system.
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