Near Rationality and Competitive Equilibria in Networked Systems

TL;DR

This paper examines the limitations of pure Nash equilibria in networked systems and suggests that considering more general competitive equilibria can better align game-theoretic models with real-world observations.

Contribution

It highlights the constraints of traditional Nash equilibrium models and advocates for broader equilibrium concepts in analyzing networked systems.

Findings

Pure Nash equilibria may be too restrictive for practical systems

Case studies show limits of Nash-based models in security, congestion, and network formation

Generalized competitive equilibria can better match empirical behaviors

Abstract

A growing body of literature in networked systems research relies on game theory and mechanism design to model and address the potential lack of cooperation between self-interested users. Most game-theoretic models applied to system research only describe competitive equilibria in terms of pure Nash equilibria, that is, a situation where the strategy of each user is deterministic, and is her best response to the strategies of all the other users. However, the assumptions necessary for a pure Nash equilibrium to hold may be too stringent for practical systems. Using three case studies on computer security, TCP congestion control, and network formation, we outline the limits of game-theoretic models relying on Nash equilibria, and we argue that considering competitive equilibria of a more general form may help reconcile predictions from game-theoretic models with empirically observed behavior.