Igal Milchtaich

Internalization of Social Cost in Congestion Games

Economic Theory 71 (), 717–760

Abstract

Congestion models may be studied from either the users’ point of view or the social one. The first perspective examines the incentives of individual users, who are only interested in their own, personal payoff or cost and ignore the negative externalities that their choice of resources creates for the other users. The second perspective concerns social goals such as the minimization of the mean travel time in a transportation network. This paper studies a more general setting, in which individual users attach to the social cost some weight r that is not necessarily 0 or 1. It examines the comparative-statics question of whether higher r necessarily means higher social welfare at equilibrium.

JEL classification

C72

Keywords

Social cost; Price of anarchy; Congestion games; Altruism; Stability of equilibrium; Potential game