Choice of routes in congested traffic networks: Experimental tests of the Braess Paradox

The Braess Paradox consists of showing that, in equilibrium, adding a new link that connects two routes running between a common origin and common destination may raise the travel cost for each network user. We report the results of two experiments designed to study whether the paradox is behaviorally realized in two simulated traffic networks that differ from each other in their topology. Both experiments include relatively large groups of participants who independently and repeatedly choose travel routes in one of two types of traffic networks, one with the added links and the other without them. Our results reject the hypothesis that the paradox is of marginal value and its force diminishes with experience. Rather, they strongly support the alternative hypothesis that with experience in traversing the networks financially motivated players converge to choosing the equilibrium routes in the network with added capacity despite sustaining a sharp decline in earnings.     

Sharing the cost of redundant items

We ask how to share the cost of finitely many public goods (items) among users with different needs: some smaller subsets of items are enough to serve the needs of each user, yet the cost of all items must be covered, even if this entails inefficiently paying for redundant items. Typical examples are network connectivity problems when an existing (possibly inefficient) network must be maintained.We axiomatize a family cost ratios based on simple liability indices, one for each agent and for each item, measuring the relative worth of this item across agents, and generating cost allocation rules additive in costs.     

Network architecture, salience and coordination

This paper reports the results of an experimental investigation of dynamic games in networks. In each period, the subjects simultaneously choose whether or not to make an irreversible contribution to the provision of an indivisible public good. Subjects observe the past actions of other subjects if and only if they are connected by the network. Networks may be incomplete so subjects are asymmetrically informed about the actions of other subjects in the same network, which is typically an obstacle to the attainment of an efficient outcome. For all networks, the game has a large set of (possibly inefficient) equilibrium outcomes. Nonetheless, the network architecture makes certain strategies salient and this in turn facilitates coordination on efficient outcomes. In particular, asymmetries in the network architecture encourage two salient behaviors, strategic delay and strategic commitment. By contrast, we find that symmetries in the network architecture can lead to mis-coordination and inefficient outcomes.     

Some Implications of Imperfect Competition For Recent Trade Theory*

This paper argues that in a general-equilibrium context, it is not sensible for oligopolistic (and mono-polistically competitive) firms to maximize profit, because the outcome would be sensitive to the choice of the numeraire. the natural objective of these firms would be to maximize the utility of the shareholders if the shareholders are identical. I show that even if each firm takes the representative individual's marginal utility of income as given, the outcome of the utility maximization objective is Pareto optimal, and in equilibrium, each firm equates price with marginal cost.     

Market Entry Regulation and International Competition*

We analyze a non‐cooperative two‐country game where each government decides whether to allow free market entry of firms or to regulate market access. We show that a Pareto‐efficient allocation may result in equilibrium. In particular, if the cost difference between home and foreign production is “significant,” production will be located in the cost‐efficient country exclusively; and if this cost difference is even “substantial,” the induced allocation is also Pareto efficient. Only if the cost difference is “insignificant,” production may take place in both countries and the allocation is inefficient.     

Farsightedly stable networks

A set of networks G is pairwise farsightedly stable (i) if all possible farsighted pairwise deviations from any network g G to a network outside G are deterred by the threat of ending worse off or equally well off, (ii) if there exists a farsighted improving path from any network outside the set leading to some network in the set, and (iii) if there is no proper subset of G satisfying conditions (i) and (ii). A non-empty pairwise farsightedly stable set always exists. We provide a full characterization of unique pairwise farsightedly stable sets of networks. Contrary to other pairwise concepts, pairwise farsighted stability yields a Pareto dominant network, if it exists, as the unique outcome. Finally, we study the relationship between pairwise farsighted stability and other concepts such as the largest pairwise consistent set and the von Neumann–Morgenstern pairwise farsightedly stable set.     

Efficient Private Production of Public Goods under Common Agency

A private, profit-maximizing firm produces a public good that enters the utility functions of several users. Each of them separately designs and proposes to the firm a contract specifying a transfer payment as a function of the amount of public good supplied. The firm has to accept or to refuse each contract before knowing the realized value of a random variable that enters its cost function. We study the Nash equilibria of this game and explore some refinements ruling out Pareto inefficient equilibria.Journal of Economic LiteratureClassification Numbers: C72, H41.     

Private information,Coasian bargaining,and the second welfare theorem

Most of the debate about Coasian bargaining in the presence of externalities relates to the First Welfare Theorem: is the outcome under bargaining efficient? This debate has involved the definition and importance of transaction costs, the significance of private information, and the effect of entry. There has been little analysis of how Coasian bargaining relates to the Second Welfare Theorem: even if the bargaining outcome is efficient, does the process limit the set of Pareto optimal allocations which can be achieved?We consider a model in which individuals utilize a common resource and may affect each other's output. The individuals differ in their productivities or tastes and this information is private to each of them. The government can manage the common resource and use nonlinear taxes to correct for the externality or it can turn the common resource over to a private owner who can charge individuals to utilize it with a nonlinear fee schedule. The government and the owner have the same information about tastes and productivities of the individuals. Except for the private information, there are no bargaining or administrative costs for collecting the taxes or fees. Whether there is public or private ownership, the government desires to redistribute, but it faces self-selection constraints.We show that the outcome of Coasian bargaining is constrained Pareto efficient. That is, given the information constraints, no Pareto improvement is possible. However, private ownership may limit what Pareto optimal allocations the government can achieve. The private owner in seeking to maximize profits always proposes contracts which counteract the government's attempts to redistribute across individuals with different characteristics. Under public management, any Pareto optimum can be sustained. In this context, private ownership, while not inefficient, does limit the government's ability to redistribute.     

效率、边际等式与成本分离

理解真实世界各种现象和行为之道,在于寻找影响成本和收益的约束条件。考虑了所有的约束条件,经济总是有效率的,边际收益总是等于边际成本,私人成本与社会成本没有分离。现实中,帕累托改进是不存在的。帕累托改进要求约束条件不变,那些所谓的帕累托改进其实伴随了约束条件的改变,因而不是真正意义上的帕累托改进,也就不能成为无效率的理由了。     

RJV FORMATION AND STRATEGIC ENTRY ACCOMMODATION*

This article examines the relationship between cost reduction and public goods effect of research joint ventures (RJVs) and strategic entry deterrence. R&D is process innovation à la Kamien, Muller and Zang (1992 ) and R&D cost sharing between the incumbent and the entrant in a RJV can be asymmetric per Long and Soubeyran (2002 ). It is found that conforming with the conventional wisdom, the incumbents prefer to form RJV to deter entry when the entrant is very inefficient. However, if the entrant is moderately inefficient, it is a better choice for the incumbent to accommodate entry by forming a RJV with it. In contrast, if the entrant is very efficient, then the equilibrium RJV structure depends on the magnitude of spillover effect: it is better to deter entry in the case of high spillover effect.     

International trade and consumption network externalities

This paper studies the effects of trade liberalization in the presence of consumption network externalities. The framework is applicable to the choice of network products and sheds light on the debate on globalization and culture. In an extended Ricardian model of international trade the paper shows that: (i) trade is not Pareto inferior to autarky if the free trade equilibrium is unique; (ii) trade is not Pareto superior to autarky if both countries are diverse (network competition) under free trade, but can be if each country is homogenous (network monopoly); (iii) and when multiple free trade equilibria exist everybody in a country can lose from free trade if that country is homogenous under autarky. Consumers of imported network goods tend to gain, while consumers of exported network goods tend to lose from trade liberalization.     

Choice of angiotensin receptor blocker in moderate hypertension. A UK-based cost–benefit comparison of olmesartan- and candesartan-based regimens

Abstract

Introduction:

Selection of antihypertensive therapy hinges on an appropriate combination of efficacy, tolerability and compatibility with co-morbidities. Within a given class of antihypertensives, the choice of agent is often driven by cost, with the cheapest appropriate agent being chosen. Amongst the angiotensin receptor blockers (ARBs), this choice will often be losartan, as it is available in generic form. However, as the blood pressure lowering efficacy of losartan is modest, some patients will require an alternative ARB. In the UK this choice is often candesartan, although the agent with greatest BP lowering efficacy is olmesartan. The objective of this study was to use a cost-benefit model to compare the costs associated with target achievement using each of these two agents, in order to guide optimum use of prescribing budgets.

Method:

A probabilistic cost-benefit model was constructed for a cohort of patients with moderate hypertension, based on a standardised titration and maintenance algorithm using either olmesartan or candesartan, combined with thiazide and calcium channel blocker where required. Direct treatment costs were recorded, along with the proportion of patients achieving pre-defined treatment targets at each treatment level. Results were expressed as mean treatment cost per patient reaching target.

Results:

Based on the current QoF target of 150?mmHg systolic, 94.3% of patients on the olmesartan-based regimen reached target of 150?mmHg, compared with 89.0% of those on the candesartan-based regimen. 86% of olmesartan patients reached target on <3 drugs, compared with 74% of candesartan patients. The mean 12-month cost per patient reaching target was £171.36 for olmesartan versus £189.91 for candesartan. Ongoing annual maintenance costs for patients at target were £169.97 and £182.64, respectively. Similar results were obtained when considering alternative treatment targets

Limitations:

The study only compared two ARBs – candesartan and olmesartan and the results relate to prescribing costs only and do not include other healthcare costs. Additionally, the chosen outcome was blood pressure target achievement, rather than clinical endpoints. Given the stated objectives of the model, we do not believe these issues will have introduced bias in the direction of either comparator

Conclusion:

Although olmesartan has an apparently higher acquisition cost than candesartan, its superior BP lowering efficacy means that the overall cost per patient treated to target is actually lower. This result could have significant implications for making savings within primary care prescribing budgets in the UK.     

Decentralized pricing in minimum cost spanning trees

In the minimum cost spanning tree model we consider decentralized pricing rules, i.e., rules that cover at least the efficient cost while the price charged to each user only depends upon his own connection costs. We define a canonical pricing rule and provide two axiomatic characterizations. First, the canonical pricing rule is the smallest among those that improve upon the Stand Alone bound, and are either superadditive or piece-wise linear in connection costs. Our second, direct characterization relies on two simple properties highlighting the special role of the source cost.     

Subgame-perfect implementation of bargaining solutions

We study house allocation problems introduced by L. Shapley and H. Scarf (1974, J. Math. Econ.1, 23–28). We prove that a mechanism (a social choice function) is individually rational, anonymous, strategy-proof, and nonbossy (but not necessarily Pareto efficient) if and only if it is either the core mechanism or the no-trade mechanism, where the no-trade mechanism is the one that selects the initial allocation for each profile of preferences. This result confirms the intuition that even if we are willing to accept inefficiency, there exists no interesting strategy-proof mechanism other than the core mechanism. Journal of Economic Literature Classification Numbers: C71, C78, D71, D78, D89.     

Farsightedly stable networks

A set of networks G is pairwise farsightedly stable (i) if all possible farsighted pairwise deviations from any network g∈ G to a network outside G are deterred by the threat of ending worse off or equally well off, (ii) if there exists a farsighted improving path from any network outside the set leading to some network in the set, and (iii) if there is no proper subset of G satisfying conditions (i) and (ii). A non-empty pairwise farsightedly stable set always exists. We provide a full characterization of unique pairwise farsightedly stable sets of networks. Contrary to other pairwise concepts, pairwise farsighted stability yields a Pareto dominant network, if it exists, as the unique outcome. Finally, we study the relationship between pairwise farsighted stability and other concepts such as the largest pairwise consistent set and the von Neumann–Morgenstern pairwise farsightedly stable set.     

A unified treatment of finite and infinite economies: limited arbitrage is necessary and sufficient for the existence of equilibrium and the core

Summary. A single condition, limited arbitrage, is shown to be necessary and sufficient for the existence of a competitive equilibrium and the core in economies with any number of markets, finite or infinite, with or without short sales. This extends earlier results of Chichilnisky [8] for finite economies. This unification of finite and infinite economies is achieved by proving that in Hilbert spaces limited arbitrage is necessary and sufficient for the compactness of the Pareto frontier. Limited arbitrage has also been shown to be necessary and sufficient for a resolution of the social choice paradox [9], [10], [12], [13], [14]. Received: August 4, 1995; revised version: April 11, 1997     

社会网络联系与用户创新研究

传统社会网络理论认为,创新用户间的社会网络联系有利于提升用户创新绩效,但在考虑社会网络成本前提下,不同质量水平的社会网络联系对用户创新绩效具有不同影响。选取乐高开放式创新平台为典型案例,编写爬虫程序获取平台客观数据,通过构建创新用户社会网络,实证检验高质量和低质量社会网络联系对用户创新的异质性影响。结果发现,创新用户拥有的社会网络联系总数对用户创新绩效无显著影响,社会网络联系质量才是影响用户创新绩效的关键。其中,高质量联系能够显著提升用户创新产出价值,并显著减少创意项目淘汰概率;而低质量联系则会显著降低用户创新产出价值,且微弱提高创意项目淘汰概率。以此为基础,为创新用户和开放式创新平台方提出策略性建议。     

Implementing efficient graphs in connection networks

We consider the problem of sharing the cost of a network that meets the connection demands of a set of agents. The agents simultaneously choose paths in the network connecting their demand nodes. A mechanism splits the total cost of the network formed among the participants. We introduce two new properties of implementation. The first property, Pareto Nash implementation (PNI), requires that the efficient outcome always be implemented in a Nash equilibrium and that the efficient outcome Pareto dominates any other Nash equilibrium. The average cost mechanism and other asymmetric variations are the only mechanisms that meet PNI. These mechanisms are also characterized under strong Nash implementation. The second property, weakly Pareto Nash implementation (WPNI), requires that the least inefficient equilibrium Pareto dominates any other equilibrium. The egalitarian mechanism (EG) and other asymmetric variations are the only mechanisms that meet WPNI and individual rationality. EG minimizes the price of stability across all individually rational mechanisms.     

Private provision of a discrete public good: efficient equilibria in the private-information contribution game

We study the voluntary provision of a discrete public good via the contribution game. Players independently and simultaneously make nonrefundable contributions to fund a discrete public good, which is provided if and only if contributions cover the cost of production. We characterize nonconstant continuous symmetric equilibria, giving sufficient conditions for their existence. We show the common normalization by which players’ values are distributed over [0, 1] is not without loss of generality: if the distribution over this interval has continuous density f with f(0) >  0, then no (nonconstant) continuous symmetric equilibrium exists. We study in detail the case in which players’ private values are uniformly distributed, showing that, generically, when one continuous equilibrium exists, a continuum of continuous equilibria exists. For any given cost of the good, multiple continuous equilibria cannot be Pareto ranked. Nevertheless, not all continuous equilibria are interim incentive efficient. The set of interim incentive efficient equilibria is exactly determined. The authors thank Manfred Dix, George Mailath, Andrew Postlewaite, and an anonymous referee for their comments.     

The core in an oligopoly market with indivisibility

Summary. This paper studies the core in an oligopoly market with indivisibility. It provides necessary and sufficient conditions for core existence in a general m-buyer n-seller market with indivisibility. When costs are dominated by opportunity costs (i.e., a firm's variable costs are sufficiently small), the core condition can be characterized by the primitive market parameters. In a 3-2 market with opportunity cost, the core is non-empty if and only if the larger seller's opportunity cost is either sufficiently large or sufficiently small. Received: June 9, 1999; revised version: October 22, 1999