# Controlling Human Utilization of Failure-Prone Systems via Taxes

arXiv: https://arxiv.org/abs/1802.09490 · HTML: https://mlsanity.com/paper/1802.09490/

## Key facts

- Cited by 1 papers in the map (data through 14 Oct 2026).
- First posted on arXiv 26 Feb 2018.

## Built on by (most cited first, 1 of 1)

- [Contextual Causal Bayesian Optimisation](https://mlsanity.com/paper/2301.12412/) (2023)

## Abstract (arXiv)

We consider a game-theoretic model where individuals compete over a shared failure-prone system or resource. We investigate the effectiveness of a taxation mechanism in controlling the utilization of the resource at the Nash equilibrium when the decision-makers have behavioral risk preferences, captured by prospect theory. We first observe that heterogeneous prospect-theoretic risk preferences can lead to counter-intuitive outcomes. In particular, for resources that exhibit network effects, utilization can increase under taxation and there may not exist a tax rate that achieves the socially optimal level of utilization. We identify conditions under which utilization is monotone and continuous, and then characterize the range of utilizations that can be achieved by a suitable choice of tax rate. We further show that resource utilization is higher when players are charged differentiated tax rates compared to the case when all players are charged an identical tax rate, under suitable assumptions.