I wonder how many Dopers are familiar with Braess’s Paradox. The paradox is that adding a new road can slow traffic. This doesn’t just arise in contrived situations, but actually applies frequently in the real world. In 1990, traffic sped up the day New York’s 42nd street was closed. The concept is applied by real-world traffic engineers, e.g. “A few years ago, traffic planners made the decision to tear down a 6-lane highway in Seoul, South Korea and replace it with a five-mile long park. Many transportation professionals were shocked, but surprised when the traffic congestion actually improved.” Here’s another closely related paradox.
It might be fun to identify some other mathematical counterexamples with real-world interest, but please do so in a different thread. I intend to follow up here, by using Braess’s Paradox to segue into a larger, more important point.
The Wikipedia article does a good job of explaining the “paradox” but I’ll spend the rest of this post summarizing their example.
Drivers need to commute from Startburg to Endtown and have two choices.
Option A) They can take the road to Ableton, then the $45 ferry from Ableton to Endtown. A complication is that time is money and the time cost of traveling the road to Ableton varies with traffic: zero if the road is otherwise empty, $40 if all the vehicles traveling from Startburg to Endtown have taken this road, and proportional to the traffic for any amount in between. As we will see, half the traffic will use this road, so its time cost is $20, and the total cost of travel for drivers who use Option A is 20+45 or $65.
Option B) This option is very similar in effect to Option B. Take the $45 ferry from Startburg to Bakersville, then the road from Bakersville to Endtown, which has just the same cost schedule as the road from Startburg to Ableton.
Options A and B are essentially the same so half the traffic will pick (A) at random, for a total cost of $65, the other half will pick (B) for a $65 cost. If the use of (A) rises, its cost will rise while B’s cost declines; smart consumers will then cause equilibrium to be restored.
Now an entrepreneur builds a new bridge from Ableton to Bakersville and charges only $2 as toll. The first driver to use this bridge is delighted. He drives to Ableton, losing only $20 in wait time, since half the traffic is still taking the old ferry from Startburg to Bakersville, pays $2 toll on the new bridge, then takes the Bakersville-Endtown road for another $20. Total cost is $42, significantly better than the $65 everyone else pays.
But the other drivers soon figure out the new route and they all take it. Since 100% of the traffic is now using both the Startburg-Ableton road and the Bakersville-Endtown road, each of those roads now costs $40 in wait time. With the $2 toll on the new bridge, the total cost to travel from Startburg to Endtown has gone up to $82, compared with the old $65 cost!
Now, at this point, what decisions do the market participants make? A driver can take the old ferry to Bakersville, but then he still has to travel on the congested Bakersville-Endtown road and ends up spending $85 instead of $82. Similarly, if he takes the old ferry from Ableton he ends up spending $85. Drivers can do no better than $82 or $85, even though they made the trip for $65 before the bridge was built!
And what about the entrepreneur who’s operating the bridge? He can increase the toll to $4 and the drivers will still all be better off using his bridge. Drivers would all be better off if none of them took the bridge, but, regardless of other drivers’ actions, each driver individually is better off paying $4 to take the bridge.