Efficiency of a Shared Resource in Service Industries with Differentiated Services
We consider a facility where several providers compete with differentiated services and congestion depends on the total number of users. We provide a tight characterization of the relative welfare loss under the Nash setting with respect to a fully efficient setting. Contrary to the conventional wisdom, we show that mergers could lead to higher welfare. Lastly, we propose an alternative implementation of congestion pricing which achieves the optimal social welfare under the Nash setting.
