Information Design for Congested Social Services: Optimal Need-Based Persuasion

55 Pages Posted: 24 May 2021 Last revised: 23 Oct 2022

See all articles by Jerry Anunrojwong

Jerry Anunrojwong

Columbia University - Columbia Business School, Decision Risk and Operations

Krishnamurthy Iyer

University of Minnesota - Twin Cities - Department of Industrial and Systems Engineering

Vahideh Manshadi

Yale School of Management

Date Written: May 19, 2021

Abstract

We study the effectiveness of information design in reducing congestion in social services catering to users with varied levels of need. In the absence of price discrimination and centralized admission, the provider relies on sharing information about wait times to improve welfare. We consider a stylized model with heterogeneous users who differ in their private outside options: low-need users have an acceptable outside option to the social service, whereas high-need users have no viable outside option. Upon arrival, a user decides to wait for the service by joining an unobservable first-come-first-serve queue, or leave and seek her outside option. To reduce congestion and improve social outcomes, the service provider seeks to persuade more low-need users to avail their outside option, and thus better serve high-need users. We characterize the Pareto-optimal signaling mechanisms and compare their welfare outcomes against several benchmarks. We show that if either type is the overwhelming majority of the population, information design does not provide improvement over sharing full information or no information. On the other hand, when the population is sufficiently heterogeneous, information design not only Pareto dominates full-information and no-information mechanisms, in some regimes it also achieves the same welfare as the “first-best”, i.e., the Pareto-optimal centralized admission policy with knowledge of users’ types.

Keywords: information design, social services, Pareto improvement, congestion

Suggested Citation

Anunrojwong, Jerry and Iyer, Krishnamurthy and Manshadi, Vahideh, Information Design for Congested Social Services: Optimal Need-Based Persuasion (May 19, 2021). Columbia Business School Research Paper, Available at SSRN: https://ssrn.com/abstract=3849746 or http://dx.doi.org/10.2139/ssrn.3849746

Jerry Anunrojwong

Columbia University - Columbia Business School, Decision Risk and Operations ( email )

New York, NY
United States

HOME PAGE: http://jerryanunroj.github.io/

Krishnamurthy Iyer

University of Minnesota - Twin Cities - Department of Industrial and Systems Engineering ( email )

111 Church St SE
Minneapolis, MN 55455
United States

Vahideh Manshadi (Contact Author)

Yale School of Management ( email )

135 Prospect Street
P.O. Box 208200
New Haven, CT 06520-8200
United States

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