Second-best mechanisms in queuing problems without transfers:The role of random priorities

Abstract

This paper characterizes the second-best mechanism chosen by a benevolent planner under incentive compatibility constraints in queuing problems without monetary transfers. In the absence of monetary compensations, separation between types can only occur if jobs are processed with a probability strictly smaller than one for some configurations of the types. This entails a large efficiency cost, and the planner optimally chooses a pooling contract when types are drawn from a continuous distribution and when binary types are sufficiently close. In the binary model, a separating contract is optimal when the difference between high and low types is large, and results in a low probability of processing jobs when both agents announce high types.