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Maximizing social welfare in congestion games via redistribution

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  • Naroditskiy, Victor
  • Steinberg, Richard

Abstract

It is well-known that efficient use of congestible resources can be achieved via marginal pricing; however, payments collected from the agents generate a budget surplus, which reduces social welfare. We show that an asymptotically first-best solution in the number of agents can be achieved by the appropriate redistribution of the budget surplus back to the agents.

Suggested Citation

  • Naroditskiy, Victor & Steinberg, Richard, 2015. "Maximizing social welfare in congestion games via redistribution," LSE Research Online Documents on Economics 62771, London School of Economics and Political Science, LSE Library.
    • Handle: RePEc:ehl:lserod:62771
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    File URL: http://eprints.lse.ac.uk/62771/
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    References listed on IDEAS

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    5. Adler, Jeffrey L. & Cetin, Mecit, 2001. "A direct redistribution model of congestion pricing," Transportation Research Part B: Methodological, Elsevier, vol. 35(5), pages 447-460, June.
    6. Bailey, Martin J, 1997. "The Demand Revealing Process: To Distribute the Surplus," Public Choice, Springer, vol. 91(2), pages 107-126, April.
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    Cited by:

    1. Lindsey, Robin & de Palma, André & Silva, Hugo E., 2019. "Equilibrium in a dynamic model of congestion with large and small users," Transportation Research Part B: Methodological, Elsevier, vol. 124(C), pages 82-107.

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    More about this item

    Keywords

    redistribution mechanisms; congestion; VCG;
    All these keywords.

    JEL classification:

    • C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games
    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design

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