Competition and efficiency in congested markets
by Daron Acemoglu
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 root2-2 with positive latency at zero flow. These bounds are tight even when the numbers of routes and oligopolists are arbitrarily large. Keywords: competition, congestion, externalities, networks, oligopoly. JEL Classifications: D43, D45, D62.
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Econometric models, Oligopolies, Competition| Edition | Availability |
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Competition and efficiency in congested markets
2006, Massachusetts Institute of Technology, Dept. of Economics
in English
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Edition Notes
"January 20, 2006."
Includes bibliographical references (p. 45-48).
Abstract in HTML and working paper for download in PDF available via World Wide Web at the Social Science Research Network.
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