Lottery Rather than Waiting-line Auction

This paper studies the allocative efficiency of two non-price allocation mechanisms — the lottery (random allocation) and the waiting-line auction (queue system) — for the cases where individuals possess identical time costs (the homogeneous case), and where time costs are correlated with valuations (the heterogeneous case). The relative efficiency of the two mechanisms is shown to depend critically on a scarcity factor (measured by the ratio of the number of objects available for allocation over the number of participants) and on the shape of the distribution of valuations. We found that the lottery is more efficient than the waiting-line auction for a wide range of situations, and that while heterogeneity of time costs may improve the allocative efficiency of the waiting-line auction, the ranking on relative efficiency is not altered.