SMU SOE Online Seminar (Mar 3, 2022, 4.00pm-5.30pm):Winners and Losers in Priority Services

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TOPIC:

WINNERS AND LOSERS IN PRIORITY SERVICES

ABSTRACT We analyze the implications of introducing priority service on consumers' welfare. In monopoly markets, introducing priority service decreases the consumers' surplus unless priority service substantially enhances the set of consumers by adding ones who would not purchase the basic service otherwise. This negative effect exists despite increasing the assignment efficiency: the monopolist extracts from consumers a total payment higher than the total efficiency gain generated by the service and hence leaves consumers worse off than when no priority is offered at all. In duopoly markets with homogeneous customers the equilibrium price and customers' welfare coincide with the monopoly outcome where this monopolist faces half of the market. With heterogeneous customers as well priority reduces the aggregated consumers' welfare. Our conclusion is that in many markets in which priority service is offered priority service erects barriers to competition that are embedded in the nature of the provided service. Keywords: Externalities, priority pricing. JEL Codes: D62, D4. Click here to view the paper. Click here to view the speaker's profile.		This seminar will be held virtually via Zoom. A confirmation email with the Zoom details will be sent to the registered email by 2 March 2022.
		PRESENTER Alex Gershkov The Hebrew University of Jerusalem
		RESEARCH INTERESTS Information Economics Economic Theory Microeconomics Game Theory Mechanism Design
		DATE: 3 March 2022 (Thursday)
		TIME: 4.00pm - 5.30pm

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