Long ques and economic inefficiency

At some time or other, most of us would have been part of long ques to access some service. Most commonly we would have spent long agonising waiting time in ques for buying cinema ticket, and railway or bus tickets. We in Andhra Pradesh can more easily relate such experience with the long ques for having darshan (glimpse) of Lord Venkateswara in Tirupati.

I am sure nobody will dispute my claim that these ques are responsible for huge loss of economic efficiency and do not serve any meaningful purpose. For a start, these ques do not discriminate between the repective urgency and needs of those standing in it. By treating all those standing on equal terms, it ignores the differential willingness to pay among them. Some of the people, faced with an urgency or who attach more value for their time, will obviously be willing to pay a premium to access the service at the earliest.

Let us try to conceptualize the problem. As mentioned earlier, the long ques do not take into account the willingness to pay of certain people. Economists would see this as a clear case of economic inefficiency and deadweight loss. Further, the one-size-fits-all arrangement of que results in substantial loss of revenue to the service provider. In our quest for a solution to this, we need to keep in mind that in any solution to this problem, some people will always lose out either by not getting the service at all (not getting the cinema tickets) or being the last to access the service (Tirupati darshan). So our limited objective should be to put in place an arrangement that would optimize the time spend by different individuals after taking into account their preferences.

How will this que arrangement work? For the simpler public service ques, each category of que can be divided into two, say equal, parts. One part, consisting of those unwilling to pay the additional premium, can continue to be part of the line and access the service in a que. The other part can assemble in an auction hall for a multiple-bid Dutch auction. In such auctions, the auction prices start high and then keeps dropping till all the units are sold out.

The details of the auctions can vary widely. The offset rate at which the auction starts can be determined by the auctioneer. In fact for non-public service items like the cinema tickets, even all the tickets can be sold through these auctions. Maybe some part of ticket can be sold through online auctions, and the rest by auctions, say half hour before the show starts. The auctions can even be held in smaller groups, so as to reduce the typical confusion that surrounds them.

The solution for the famous Tirupathi darshan ques is more complicated. Besides serving a public service function and unlike the cinema ticket ques which are static, the Tirupathi ques are in a constant state of flux, with people pouring in regularly. Tickets are issued for different categories of darshans, based on the distance of the darshan. A separate que can be formed for each category for all those unwilling to pay any additional amount. Periodic auctions, can then be held for those willing to pay the darshan premiums. With time the general market rates in auctions would become public knowledge and only those willing to pay those sums will attend the auctions. In order to ensure that those standing in the que are not greatly disadvantaged and do not get pushed back significantly, we can control the periodicity of auctions. The periodicity of auctions can also vary based on the pilgrims rush at any time. We would thereby have two sets of ques for each category, based on the need and urgency of the people, measured in terms of their willingness to pay - the general que and those who have paid the premiums (maybe these ques can merge into one at the entrance). In order to deter all those who would be willing to pay only small premiums of say, one or two rupees, the auctioneer can fix a minimum initial differential of say, Rs 5.

What are the benefits of this intervention? This auctioning would not only reduce the economic inefficiency, it would also help in significantly controlling the black market in these services. It is common practice in cinema theatres for touts to sell these tickets at a huge premium in the black. This not leads to huge loss of unaccounted for revenue, it also engenders a culture of fraud and even violence. Its benefits on the larger economy - cinema theatre owners will get more money and hopefully set up more theatres, railway and bus operators get more money and will operate more services, and total opportunity costs of waiting times will be reduced.

There is one thing which bothers me about this arrangement. Economists make a huge assumption by reducing each individual's utility to his or her willingness to pay. This is a highly debatable assumption. For example, I am waiting in a long que to buy ticket for the next India-Australia cricket Test, but cannot afford the auction premium. I pride myself as an inveterate cricket fan and tries to go and see matches whenever possible. There are others in the que, part of a large corporate group out to have some fun, not especially interested in the game and in fact seeing a cricket Test at the ground for the first time. But they are willing to pay the auction premium and thus pip me to the match. Except by the economists' definition of utility, the marginal utility gained by me in seeing the match is obviously bigger than that of the group.

These auctions are obviously not the ideal solution to the que problem. There are also certain other solutions worth trying. They may fail or succeed. There is an interesting article by Steven Landsburg in the Slate "The First One Now Will Later Be The Last". But I suppose till we come up with a better solution to quantifying utility (say a utilometer, which measures our hormone secretion while we are standing on the que!), we may have to settle for the next best solutions.