Marginal Revolution, a price theory blog, does “markets in everything”.  Cheap Talk, a game theory blog, should do Prisoner’s Dilemma in everything.

Individual drivers do not take the “negative externality” they impose on others into account when they choose their routes from A to B.  If a benevolent planner could force people down certain routes, that could reduce travel times.  The planner solution is not an equilibrium: drivers have an incentive to deviate because the socially optimal solution implies different travel times on different routes.

This is the the Prisoner’s Dilemma for traffic, discovered by computer scientists. They take the ratio of the equilibrium travel times to the socially optimal times and call that the “price of anarchy”.  Cool name for it but to really determine the price of anarchy, we would need utility information – if the value of time is low, no need to build a public transit system.

Advertisements