Internalization of Social Cost in Congestion Games

Abstract: Congestion models may be studied from either a social or an individual point of view. The first, more traditional perspective concerns social goals such as the minimization of the mean travel time in a transportation network. The second perspective examines the incentives of individual users, who are only interested in their own, personal payoff or cost and ignore the negative externalities that their choices of resources create for the other users. This paper studies a more general setting in which individual users attach to the social cost some weight r that is not necessarily 1 or 0, and may also be negative. It examines the comparative-statics question of whether higher r necessarily means higher social welfare at equilibrium.