Competition and Efficiency in Congested Markets

@article{Acemoglu2007CompetitionAE,
  title={Competition and Efficiency in Congested Markets},
  author={Daron Acemoglu and Asuman E. Ozdaglar},
  journal={Math. Oper. Res.},
  year={2007},
  volume={32},
  pages={1-31}
}
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 when there is zero latency at zero flow and a tight bound of 2… CONTINUE READING
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