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The Price of Anarchy in Games of Incomplete Information TIM ROUGHGARDEN Stanford University We outline a recently developed theory for bounding the ine ciency of equilibria in games of incomplete information, with applications to auctions and routing games. Categories and Subject Descriptors: F.0 [Theory of Computation]: General General Terms: Algorithms, Economics, Theory Additional Key Words and Phrases: Price of anarchy, incomplete information, congestion games, auctions 1. INTRODUCTION Every student of game theory learns early and often that equilibria are ine cient. Such ine ciency is ubiquitous, and is present in many real-world situations and for many di erent reasons: in Prisoner s Dilemma-type scenarios; from uninternalized negative externalities in the tragedy of the commons and in games with congestion e ects; from uninternalized positive externalities with a public good or with network e ects; from a failure to coordinate in team games; and so on. The past ten years have provided an encouraging counterpoint to this widespread equilibrium ine ciency: in a number of interesting application domains, gametheoretic equilibria provably approximate the optimal outcome. Phrased in modern jargon, the price of anarchy the worst-case ratio between the objective function value of an equilibrium, and of optimal outcome
ACM SIGecom Exchanges – Association for Computing Machinery
Published: Jun 1, 2012
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