When’s it OK to buy your way to the front of the line? That is essentially the question behind a report on the BBC website (Priority queues: Paying to get to the front of the line, Oct 10). That essay is a distillation of a longer podcast that is well worth a listen:
The starting point of the article is that priority service has become fairly ubiquitous from airports to amusement parks to expressways.
But today, many Americans are waiting in a new kind of queue – the priority queue, where certain customers get higher priority because they pay.
In American airports, priority queues are now visible everywhere – at the check-in counter, at security and at boarding gates. Many airlines now board their passengers according to the amount of money they’ve paid for their ticket. …
Take the Six Flags White Water amusement park in Atlanta, which implemented a priority queue system in 2011.
Some guests simply queue up for their rides. Those who purchase green-and-gold wrist bands – fitted with radio frequency technology – are able to swim in the pool or eat snacks before being alerted to their turn.
Guests who pay an even higher fee – roughly double the price of admission – get the gold flash pass, cutting their waiting time in half. …
In October 2011, Atlanta created a priority lane on the highway [I-85] for drivers with a Peach Pass – the price of driving in the lane changes depending on how much traffic there is.
Critics call them “Lexus lanes”, because they claim the lanes benefit only the rich who can afford expensive cars.
Aside from the cost of the express lanes, some drivers are also upset that they replace car pool lanes – special lanes for cars with two or more passengers.
Overnight all the car pool drivers who used to ride free were pushed into the general lanes, making traffic worse for everyone except those who pay.
After the various examples, it builds to this:
Americans have a deep-rooted belief in the market and since priority queues can generate revenue it’s no surprise that they are turning up in the public sector as well.
But are traditional American values like fairness and equal opportunity really compatible with letting someone buy their way to the front of the line? And what happens when the people who pay more want more?
There are a couple of things to note here. First, technology plays a big role. It’s not that service providers have never before wanted to segment customers based on their aversion to waiting. Rather it is the availability of technology like RIFD enabled bracelets that make the expansion of priority queues easier and easier to implement.
Second, Six Flags is monkeying both with priorities and virtualizing waits. The basic Flash Pass is like Disney’s Fastpass system that let’s guests not have to be physically in the line for a particular ride in order to be waiting for that ride. Making the wait virtual allows park goers to experience more of the park and the park to sell more sodas and souvenirs. Of course, the Mouse People let anyone use Fastpass for free while Six Flags demands some gilt. (Whenever I discuss Fastpass in class, students are always amazed that Disney gives away Fastpass.)
The upper levels of Flash Pass is where priorities come in and things become like letting high level frequent fliers get in a shorter security lines or letting Lexi access a special lane of I-85. But is that all bad? Does it go against basic American values?
There are, of course, settings in which no one would object to priorities. First come, first serve would be a terrible way to run an emergency room. Even outside of life-and-death settings, priorities can be efficient. All it takes is some difference in waiting costs to economically justify different treatment of customers. If my waiting costs are twice yours, total system costs are lowered when I am allowed to jump ahead of you in line.
That’s at least true in theory. In practice, things get a little tricky. First, I’m not sure most of us have a clear idea of what our waiting costs are. At any given instance, I might be willing to spend $50 to save an hour of waiting time but at others I am not. Second, even if we all had a clear idea of our waiting costs at a particular snapshot in time, I am not sure that converts into ability to pay. Take the Six Flags example. For whom would priority access be more important, the family that is making only one trip to the park this season or the one that will go several times? If you’re only going once, then spending lots of time in line really limits what you can do. The family going multiple times, however, can experience more of the park over several visits. But why might a family go only once? Because a basic visit to Six Flags starts at $41.99 a head plus $20 to park. Thus, a family that is splurging to visit Six Flags may have their experienced undermined by the affluent family to can casually opt to jump the queue.
That points to another issue. Selling priority for profit can alter the efficiency story. Six Flags certainly has more vested in making sure an affluent family comes back several times a season than hoping that penny pinchers have a nice time on their one trip. In particular Six Flags has an incentive to make sure that the affluent family ponies up for the premium treatment they “deserve.” How do they do that? By making sure that the basic level of service stinks. More formally, a service provider has incentive to distort the service level received by lower priority customers (i.e., to intentionally slow them down) in order to exact a larger payment from more time sensitive, high priority customers. There is nothing special about this. General Motors should be doing the same thing with Chevy pick ups — limiting options and not having the nicest interiors so more people will trade up to a GMC. What comes into play here is the self-reinforcing aspect of queuing systems. Implementing priorities introduces negative externalities; for a fixed capacity, making things better for high priority customers means making things worse for everyone else.
That’s what strikes me as the socially distasteful part of this. Yes, priorities create options and choice and it is hard to be against that. But priorities also punish people who are unable to buy into the top class. Compare hotels to a Lexus lane. Hotels are an example of a market where offerings run the gamut from bare bones to insanely luxurious but no one really complains that the Four Seasons exists when they choose to stay at the Holiday Inn. Of course, the existence of the Four Seasons doesn’t make staying at the Holiday Inn worse. The Lexus lane, in contrast, harms those that do not choose to pay for access. They necessarily have a worse commute because others have an easy trip.
This brings to mind an Atlantic article from this past spring on whether the reach — or implementation — of markets has gone too far (What Isn’t for Sale?, Apr 2012).
Why worry that we are moving toward a society in which everything is up for sale? …
One [reason] is about inequality. … In a society where everything is for sale, life is harder for those of modest means. The more money can buy, the more affluence—or the lack of it—matters. If the only advantage of affluence were the ability to afford yachts, sports cars, and fancy vacations, inequalities of income and wealth would matter less than they do today. But as money comes to buy more and more, the distribution of income and wealth looms larger.
This seems particularly true when we consider congestion prone services such as a public highway. The double whammy of time and money means that those with limited means are forced to more and more compromises, whether that is not being able to live in a particular neighborhood or forcing them to travel and weird times all because they are priced out of the standard commute.
A final point. This article really peaked my interest because it speaks to something I struggle with as a parent. We are the family that can afford Six Flag’s Flash Pass. I’m the dad with sufficient flyer status to get the whole family in the shorter TSA line. And my kids know it. They object to waiting and if there was ever a reason to pay to skip a line, it is to have the kids zip it. But at what point does that lead to spoiled brats? Waiting is part of life; it’s not really fun but it is in many ways most tolerable when it is fair and the pain is spread equally.
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“more formally, a service provider has incentive to distort the service level received by lower priority customers”… What kind of human being thinks like this? One that thinks that ethics and morality are for losers, or what?
There is nothing inherently immoral about pricing different levels of service — particularly for purely discretionary services like an amusement park. This is just a question of how the math works out. It benefits the firm to have a large difference between the tiers of service. Look at how cell phone providers price different data plans. You can get a cheap plan but it has a really puny number of minutes.