Avoid fixed pricing: Consume less, earn more, make clients happy

Efficient management of resources in a society is a key ingredient of many multiagent systems. Self-interested agents (either human or automated) working to maximize their own benefit might make excessive use of a common resource, a situation known as the "tragedy of the commons". Therefore, game-theoretic considerations should come into play in the design of mechanisms that avoid such undesirable outcomes. In this paper, we consider two prototypical policies that are being used for the management of costly resources. In the first, consumers pay a fixed price and the provider covers the cost of the consumed resource; in the second, consumers pay according to the amount they use. It is clear that the first policy may prompt excessive and wasteful consumption. We analyze the incentives of the agents involved, assuming that all of them are self-interested and behaving strategically, and we prove that per-use pricing policy is better for the provider in the equilibrium outcome. We then show conditions under which consumers will also benefit from this policy on average, although some free-riders may still favor the wasteful fixed-price policy. Finally, we introduce a mechanism where consumers are allowed to choose their own policy, and show that it must converge to the efficient equilibrium where all consumers are paying according to their use.