Chapter 11 analyzes congestion effects in road networks and in packet-switched communication networks. It focuses on Wardrop equilibrium, the appropriate version of Nash equilibrium for such networks. The analysis begins with the Braess paradox, where improving a link may actually increase overall congestion for a given set of drivers. The analysis includes results bounding the degree of inefficiency in equilibrium (“the price of anarchy”). One possible remedy is a Pigovian tax that can restore efficiency, even in the presence of a double marginalization-like problem arising from competition amongst profit-maximizing link-owners. The analysis exploits analogies to electrical circuits, particularly simple circuits that are Thevenin equivalent to more complex circuits.
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