Gainers and Losers in Priority Services

Research output: Contribution to journalArticlepeer-review

Abstract

We analyze the implications of priority service (PS) on customers’ welfare. In monopoly markets, PS can often decrease consumer surplus and can even yield a loss of welfare to all consumers. This happens despite its efficiency gains, as monopolists levy in revenue more than the total efficiency gains. PS can increase consumer surplus if it expands the consumption coverage—thatis,ifitintroducesnewcustomerswhowould not purchase the service otherwise. In duopoly markets, the price competition over PS can be severely eroded. Under homogeneity, firms act as if they were monopolists serving half of the market.

Original languageAmerican English
Pages (from-to)3103-3155
Number of pages53
JournalJournal of Political Economy
Volume131
Issue number11
DOIs
StatePublished - Nov 2023

Bibliographical note

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