Competition and efficiency in congested markets
By: Daron Acemoglu, Asuman E. Ozdaglar
Contributors: Ozdaglar, Asuman E.; Massachusetts Institute of Technology. Dept. of Economics
Series: Working paper series / Massachusetts Institute of Technology, Dept. of Economics -- working paper 05-06; Working paper (Massachusetts Institute of Technology. Dept. of Economics) -- no. 05-06.
Publisher: Massachusetts Institute of Technology, Dept. of Economics
Published: 2005
Place of publication: Cambridge, Mass
Language: eng
Number of pages: 41
Description: 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. Keywords: communication networks, congestion, efficiency, oligopoly. JEL Classifications: D43, C62.
Notes: "February 17, 2005."

Includes bibliographical references (p. 41-43)

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