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Priority Service: Pricing, Investment, and Market Organization

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Author Info
Chao, Hung-po
Wilson, Robert

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Abstract

Priority service offers a menu of contingent contracts for distribution of scarce supplies. Prices inducing customers' efficient self-selection are expectations of spot prices for comparable service. Customers' selections reveal the benefit of capacity expansion. Priority service can be implemented via sale of "priority points" or via provision of compensatory insurance. Sever al priority classes suffice to obtain most of the efficiency gains. P riority service Pareto dominates random rationing if excess revenue i s refunded equally to customers. Copyright 1987 by American Economic Association.

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Publisher Info
Article provided by American Economic Association in its journal American Economic Review.

Volume (Year): 77 (1987)
Issue (Month): 5 (December)
Pages: 899-916
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Handle: RePEc:aea:aecrev:v:77:y:1987:i:5:p:899-916

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  3. Noussair, Charles & Porter, David., 1990. "Allocating Priority with Auctions: An Experimental Analysis," Working Papers 747, California Institute of Technology, Division of the Humanities and Social Sciences. [Downloadable!]
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  4. Hoppe, Heidrun C. & Moldovanu, Benny & Sela, Aner, 2006. "The Theory of Assortative Matching Based on Costly Signals," CEPR Discussion Papers 5543, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
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  5. Hung-po Chao & Shmuel Oren & Robert Wilson, 2005. "Restructured Electricity Markets: A Risk Management Approach," Levine's Bibliography 784828000000000232, UCLA Department of Economics. [Downloadable!]
  6. Paul L. Joskow, 2005. "Markets For Power In The United States - An Interim Assessment," Working Papers 0512, Massachusetts Institute of Technology, Center for Energy and Environmental Policy Research. [Downloadable!]
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  7. Volker Nocke & Martin Peitz, 2003. "Monopoly Pricing under Demand Uncertainty: Final Sales versus Introductory Offers," PIER Working Paper Archive 03-002, Penn Institute for Economic Research, Department of Economics, University of Pennsylvania. [Downloadable!]
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  8. Rómulo Chumacero & Ricardo Paredes & José Miguel Sánchez, 2000. "Regulación para Crisis de Abastecimiento: Lecciones del Racionamiento Eléctrico en Chile," Cuadernos de Economía (Latin American Journal of Economics), Instituto de Economía. Pontificia Universidad Católica de Chile., vol. 37(111), pages 323-338. [Downloadable!]
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  10. Matsukawa, Isamu, 2006. "Regulating a Monopoly Offering Priority Service," MPRA Paper 991, University Library of Munich, Germany. [Downloadable!]
  11. G. Schwartz, 2000. "Non-Enforceability of Trade Treaties and the Most-Favored Nation Clause: A Game Theoretic Analysis of Investment Distortions," Princeton Economic Theory Papers 00s17, Economics Department, Princeton University.
  12. C.K. Woo & Brian Horii & Ira Horowitz, 2002. "The Hopkinson tariff alternative to TOU rates in the Israel Electric Corporation," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 23(1), pages 9-19. [Downloadable!]
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