The Effectiveness of Subsidies and Tolls in Congestion Games

Are rewards or penalties more effective in influencing user behavior? This article 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.