SERVICE TIME COMPETITION

How can two physically identical gasoline stations differentiate thems elves? In this article we develop and test a model of service time com petition: some stations set higher prices and thereby offer shorter qu eues, whereas other offer lower price and longer queues. We find that retail demand is sensitive to service time: customers are, on average, willing to pay about 1% more for a 6% reduction in congestion. Consis tent with the service time hypothesis, prices are more dispersed at st ations facing more direct competition.