Competition and Efficiency in Congested Markets
We study the efficiency of oligopoly equilibria in congested markets. The motivating examples are the allocation of network flows in a communication network or of traffic in a transportation network. We show that increasing competition among oligopolists can reduce efficiency, measured as the difference between users' willingness to pay and delay costs. We characterize a tight bound of 5/6 on efficiency in pure strategy equilibria. This bound is tight even when the number of routes and oligopolists is arbitrarily large. We also study the efficiency properties of mixed strategy equilibria.
|Date of creation:||Mar 2005|
|Date of revision:|
|Publication status:||published as Acemoglu, Daron and Asuman Ozdaglar. "Competition and Efficiency in Congested Markets." Mathematics of Operations Research 32 (February 2007): 1-31.|
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