An optimal mechanism charging for priority in a queue

Abstract

We derive a revenue-maximizing scheme that charges customers who are homogeneous with respect to their waiting cost parameter for a random fee in order to become premium customers. This scheme incentivizes all customers to purchase priority, each at his/her drawn price. We also design a revenue-maximizing scheme for the case where customers are heterogeneous with respect to their waiting cost parameter. Now lower cost parameter customers are encouraged to join the premium class at a low price: Given that, those with high cost parameter would be willing to pay even more for this privilege