Gainers and losers in priority services
Gainers and losers in priority services
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—that is, if it introduces new customers who would 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.
3103-3155
Gershkov, Alex
214a0b5e-c742-486d-b910-c8ec702c943a
Winter, Eyal
b65d313a-fed3-484d-ae25-9a863c296237
1 November 2023
Gershkov, Alex
214a0b5e-c742-486d-b910-c8ec702c943a
Winter, Eyal
b65d313a-fed3-484d-ae25-9a863c296237
Gershkov, Alex and Winter, Eyal
(2023)
Gainers and losers in priority services.
Journal of Political Economy, 131 (11), .
(doi:10.1086/724850).
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—that is, if it introduces new customers who would 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.
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Published date: 1 November 2023
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Local EPrints ID: 503779
URI: http://eprints.soton.ac.uk/id/eprint/503779
ISSN: 0022-3808
PURE UUID: ba3ddea0-49f0-4b87-b465-b9f43624c998
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Date deposited: 12 Aug 2025 17:14
Last modified: 13 Aug 2025 03:04
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Author:
Alex Gershkov
Author:
Eyal Winter
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