Quality & Quantity 34: 115–135, 2000.
© 2000 Kluwer Academic Publishers. Printed in the Netherlands.
Waiting Time and Production
Uncertainty in Medical Services
Associate Professor of Economics, College of Business, University of Houston–Downtown, One
Main Street, Houston, TX 77002, U.S.A., e-mail: email@example.com
Abstract. To focus on ofﬁce waiting time, the behavior of a medical practice is analyzed under
a perfectly competitive setting where ofﬁce waiting time is the only choice variable in the short-
run. The optimum waiting time is determined for both the certainty and the uncertainty cases.
Comparative statics are drawn with respect to the opportunity cost of waiting time, physician fee,
capacity, and standard deviation of waiting time. Empirical analysis of waiting time is made based on
questionnaires distributed among physicians and patients. The results are consistent with the majority
of the theoretical ﬁndings.
Key words: health, production function, waiting time.
The service industry is unique in that the existence and the rate of output are
dependent upon the customer arrival. This paper considers patient’s arrival as an
indispensable input in the production function for medical services. Here, we as-
sume that patient’s arrival is regulated by appointments, but the service time is
random. Consequently, waiting time becomes a decision factor in the production
function. Since Becker’s (1965) article on the theory of allocation of time, the
importance of the opportunity cost of time spent in the consumption of services
including education, transportation, and entertainment has been recognized. Non-
monetary factors such as opportunity cost of patient’s travel time and waiting time
have been included in the estimation of demand and pricing of medical services
(Holtmann,1972; Acton, 1975; Sloan and Lorant, 1977; DeVany et al., 1983).
Ofﬁce waiting time has also been used as a variable in the estimation of a
production function for medical services in a paper by DeVany et al. (1982). In
this study, DeVany et al. follow the initial works by other economists such as
Reinhardt (1972) to examine the impact of input regulation on the supply of dental
services and choice of inputs. The authors add customer waiting time as an input
to their production function such that it determines the rate of capacity utilization.
In their mathematical model, however, patient’s waiting time is not treated as a
choice variable and no comparative statics analysis is made with respect to the