Econometrica: Jan, 1989, Volume 57, Issue 1

Efficient and Competitive Rationing

https://doi.org/0012-9682(198901)57:1<1:EACR>2.0.CO;2-W
p. 1-40

Robert Wilson

Priority service rations available supplies according to contracts that specify each customer's priority or rank order. This alternative market form can achieve most of the efficiency gains attributed to spot markets, which in some industries are expensive to organize. Rationing by priorities is prominent in capital-intensive industries with non-storable outputs, as well as in service-sector and make-to-order industries where service is queued or congested. This paper describes the role of priority service and sketches a basic model. The main topic is efficient implementation by public enterprises and by competitive firms.