The Effectiveness of Subsidies and Tolls in Congestion Games

TL;DR

This paper compares subsidies and tolls in congestion games, showing subsidies can outperform tolls with predictable users but are less robust when user behavior varies unpredictably.

Contribution

It introduces a comparative analysis of subsidies versus tolls in congestion games, highlighting conditions where each method is more effective.

Findings

Subsidies outperform tolls with predictable user behavior.

Tolls are more robust under user heterogeneity.

Subsidies have better performance guarantees under certain conditions.

Abstract

Are rewards or penalties more effective in influencing user behavior? This work compares the effectiveness of subsidies and tolls in incentivizing user behavior in congestion games. The predominantly studied method of influencing user behavior in network routing problems is to institute taxes which alter users' observed costs in a manner that causes their self-interested choices to more closely align with a system-level objective. Another conceivable method to accomplish the same goal is to subsidize the users' actions that are preferable from a system-level perspective. We show that, when users behave similarly and predictably, subsidies offer superior performance guarantees to tolls under similar budgetary constraints; however, in the presence of unknown player heterogeneity, subsidies fail to offer the same robustness as tolls.