The first-in, first-out (FIFO) queue discipline respects the order of arrival but is not efficient when customers have heterogeneous waiting costs. Priority queues, in which customers with higher waiting costs are served before customers with lower waiting costs, are more efficient but usually involve undesirable queue-jumping behaviors that violate bumped customers' property rights over their waiting spots. To have the best of both worlds, we propose time trading mechanisms, in which customers who are privately informed about their waiting costs mutually agree on the ordering in the queue by trading positions. If a customer ever moves back in the queue, she will receive an appropriate monetary compensation. Customers can always decide not to participate in trading and retain their positions as if they are being served FIFO. We design optimal mechanisms for the social planner, the service provider, and an intermediary who might mediate the trading platform. Both the social planner's and the service provider's optimal mechanisms involve a flat admission fee and an auction that implements strict priority. If a revenue-maximizing intermediary operates the trading platform, it should charge a trade participation fee and implement an auction with some restrictions on customer trade. Therefore, customers are not strictly prioritized. However, relative to a FIFO system, the intermediary delivers value to the social planner by improving efficiency, and to the service provider by increasing its revenue.
['Luyi Yang', 'Laurens G. Debo', 'Varun Gupta']
Trading Time in a Congested Environment