Abstract

Consider a first-come first-served queue where agents arrive randomly but their participation in the queue is voluntary and strategic. This paper shows that the introduction of priority-class discrimination (retaining first-come first-serve within each class) unambiguously improves total welfare even if agents are a priori identical, i.e. agents have a fixed outside reservation utility and their unit cost of waiting (per period) is also homogeneous across agents. Furthermore, when agents have heterogeneous outside reservation utilities, those who have low outside reservation utility should be given high priority in the queue for total welfare improvement, not only for equity.