Truth-Telling in a Priority Pricing Mechanism
(2025) In Working Papers- 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,... (More)
- 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 onincentives created by the pricing structure but also on the population’s truth-telling tendencies and beliefs, offering valuable insight for designing effective pricing mechanisms. (Less)
Please use this url to cite or link to this publication:
https://lup.lub.lu.se/record/e340fba6-ceed-4110-8cc0-2201e20a01b1
- author
- Thami, Prakriti LU
- organization
- publishing date
- 2025
- type
- Working paper/Preprint
- publication status
- published
- subject
- keywords
- priority pricing, consumer welfare, truth-telling behavior, incentive-compatible pricing, D82, D9, D47, D61
- in
- Working Papers
- issue
- 2025:3
- pages
- 69 pages
- language
- English
- LU publication?
- yes
- id
- e340fba6-ceed-4110-8cc0-2201e20a01b1
- date added to LUP
- 2025-03-24 14:02:51
- date last changed
- 2025-04-04 15:22:58
@misc{e340fba6-ceed-4110-8cc0-2201e20a01b1,
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 onincentives created by the pricing structure but also on the population’s truth-telling tendencies and beliefs, offering valuable insight for designing effective pricing mechanisms.}},
author = {{Thami, Prakriti}},
keywords = {{priority pricing; consumer welfare; truth-telling behavior; incentive-compatible pricing; D82; D9; D47; D61}},
language = {{eng}},
note = {{Working Paper}},
number = {{2025:3}},
series = {{Working Papers}},
title = {{Truth-Telling in a Priority Pricing Mechanism}},
url = {{https://lup.lub.lu.se/search/files/212192295/WP25_3.pdf}},
year = {{2025}},
}