The Price of Fairness

In this paper we study resource allocation problems that involve multiple self‐interested parties or players and a central decision maker. We introduce and study the price of fairness, which is the relative system efficiency loss under a ‘fair’ allocation assuming that a fully efficient allocation is one that maximizes the sum of player utilities. We focus on two well‐accepted, axiomatically justified notions of fairness, viz., proportional fairness and max‐min fairness. For these notions we provide a tight characterization of the price of fairness for a broad family of problems.