Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/315174 
Authors: 
Year of Publication: 
2025
Series/Report no.: 
Working Paper No. 2025:3
Publisher: 
Lund University, School of Economics and Management, Department of Economics, Lund
Abstract: 
This paper studies the impact of truth-telling preferences on aggregate consumer welfare within a priority pricing (PP) mechanism. Traditional models assume individuals always misrepresent private information to maximize payoffs, yet recent evidence suggests there may be an innate preference for truth-telling. By incorporating these preferences into a theoretical framework, I show that PP enhances welfare over uniform pricing only when the probability of non-truthful individuals surpasses a critical threshold, suggesting that PP may benefit populations with low truth-telling tendencies but reduce welfare when this tendency is high. To empirically test this, I conducted an online experiment, finding that while PP incentivized truth-telling, its impact did not vary significantly across groups with differing truth-telling tendencies. Instead, participants' beliefs about others' truthfulness emerged as key in shaping behavior. These findings underscore that PP's welfare-enhancing potential depends not only on incentives created by the pricing structure but also on the population's truth-telling tendencies and beliefs, offering valuable insight for designing effective pricing mechanisms.
Subjects: 
priority pricing
consumer welfare
truth-telling behavior
incentive-compatible pricing
JEL: 
D82
D9
D47
D61
Document Type: 
Working Paper

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