Dynamic Incentives for Congestion Control

Abstract

We introduce a new dynamic pricing mechanism for controlling congestion in a network shared by non-cooperative users. The network exhibits a congestion externality and users have private information regarding their willingness to pay for network use. The externalities imply that many simple uniform price adjustment processes (e.g., tatonnement) either fail to effectively control flow demands and/or are subject to strategic manipulation. We propose a dynamic discriminatory pricing mechanism design and show that it effectively controls congestion while ensuring the efficient allocation of network capacity. We show the proposed mechanism is robust to strategic manipulation. To the best of our knowledge, there is no other dynamic pricing mechanism in the literature with these properties.