Abstract 

Anecdotally, parents report difficulty finding child care due to encountering long waitlists. However, there is little systematic evidence on the prevalence of waitlists. Persistent waitlists seemingly present a puzzle: why not raise prices to clear the waitlist? In this paper, we first document key facts about waitlists and vacancies in the child care market. More than three-quarters of centers report turning families away due to lack of space. This fraction is similar across a variety of community and provider characteristics, suggesting a common underlying cause. In the second part of the paper, we propose a model in which waitlists emerge as a result of providers maximizing profits in the face of capacity constraints and stochastic demand. Because most classroom costs are fixed regardless of enrollment, setting prices such that expected demand exceeds capacity maximizes revenue by reducing the probability of vacancies. These findings suggest that reducing parent wait times would require policy intervention in the market.

Joint with Danna Kang Thomas, University of South Carolina