Queueing, rationing, and queue-rationing
Definition
Queueing, rationing, and queue-rationing are a family of forms of non-price competition where a seller or regulatory authority deals with a shortfall (excess demand -- more demanded than supplied) by controlling who can buy how much when.
Queueing: Here, potential buyers have to wait in a queue, generally a first-come-first-serve queue. This could be a physical queue; for instance, shoppers waiting in line outside a store in order to enter and claim items, or waiting in line at a checkout counter in order to complete the transaction. If a good is sold out by the time a buyer gets to the front of the queue, the buyer is out of luck. A buyer can have only one position in a queue at a time.
Rationing: Here, potential buyers are limiting in the total quantity of an item they can purchase. The limit may be imposed per unit time (for instance, at most one loaf of bread a day). Unused rations are usually not tradable, though it may be possible to roll them over.
Queue-rationing: A mix of queueing and rationing: buyers have to wait in a queue, generally a first-come-first-serve queue. However, even when it's the buyer's turn, the buyer is constrained by rationing. There are different variants: in one variant, the buyer can immediately go to the back of the queue after completing the purchase, for the next turn. In another version, the ration is over a time period (like a day or month) so the buyer has to wait for the next time period to get in the queue again.
Causes of queueing, rationing, and queue-rationing
Excess demand due to inability of prices to adjust
Queueing typically occurs in a case of excess demand because prices are unable to adjust to market-clearing levels due to sticky prices, price ceilings or other factors.
A deliberate choice by sellers to shape their customers
In some cases, producers/suppliers may deliberately maintain shortages and not raise prices in order to make the good appear more attractive. Some possible advantages of queueing and rationing are:
- By queueing, sellers may be able to get a profile of customers who may be better for them in the long run.
- By rationing, sellers increase the number of people who buy the good, which may have long-term value for the sellers.
- Standing in a long queue itself makes people buy more: There are often a lot of items for impulse purchase at the checkout counters in supermarkets, so the longer people have to stand in queue, the more such purchases they may make. Similarly, people on a waiting list for a good sold through a website may check the website more frequently, and may as a result make many other auxiliary purchases.
More fairness
For queueing: Standing in line may be considered a fairer way of distributing resources among people with varying degrees of wealth, compared to charging a high price. This is particularly true for goods that are highly valued by all, but for which wealth effects make it much easier for the rich to purchase them. This includes, for instance, goods such as education and health care.
For rationing: Rationing distributes a scarce good more equally among people, thereby being more fair.
Tamping down on panic buying
Panic buying is a situation where buyers' "true" demand for a good does not change, but buyers still try to purchase larger quantities because of fear that other buyers will use up the existing stock. This is most common for cases where intertemporal substitution is easy: one can buy now and stock up for the future.
Panic buying can become a self-fulfilling prophecy, causing shortages. Moreover, it can lead to the bullwhip effect, where sellers incorrectly conclude that demand has intrinsically increased, leading to them producing more, but then find reduced demand in the next time period as buyers start using up their existing stocks rather than buying more.
Done correctly, rationing is most helpful for panic buying because it provides a solution to the coordination problem of buyers not trusting each other. By committing all buyers to purchasing a limited quantity of the good, rationing increases the confidence of all buyers that there will be enough for them.