Price of Anarchy

Price of Anarchy measures how much worse a system performs when individuals act in their own self-interest rather than working together to optimize overall outcomes. It’s the ratio between the worst possible efficiency (when everyone acts selfishly) and the best possible efficiency (if a central authority coordinated actions). Essentially, it quantifies the efficiency loss due to decentralized decision-making. A higher Price of Anarchy means self-interested behavior leads to significantly less optimal results for the whole system, highlighting potential inefficiencies caused by individual strategies that don’t align with collective goals.