The Google thought experiment: rationality, information and equilibrium in an exchange economy
AbstractFollowing Becker (1962), an information-theoretical thought experiment is developed to investigate whether the equilibrium properties of an exchange economy depend on the rational behaviour of agents. Transactions are logged through a communication channel into an external observer's dataset, represented by Google. At some point this data connection fails and Google no longer receives the updates encoding the transactions. It is shown that Google can nevertheless make sharp predictions concerning the state of the economy. In particular, a stable long run distribution of endowments is expected, as well as a set of price-like variables. By construction this prediction does not rest on the rationality of agents, because the information-theoretical setting forces Google to treat the missed updates as random variables.
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Bibliographic InfoPaper provided by Observatoire Francais des Conjonctures Economiques (OFCE) in its series Documents de Travail de l'OFCE with number 2009-34.
Date of creation: Dec 2009
Date of revision:
Other versions of this item:
- Sylvain Barde, 2009. "The Google thought experiment: rationality, information and equilibrium in an exchange economy," Sciences Po publications 2009-34, Sciences Po.
- C02 - Mathematical and Quantitative Methods - - General - - - Mathematical Economics
- C62 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Existence and Stability Conditions of Equilibrium
- D51 - Microeconomics - - General Equilibrium and Disequilibrium - - - Exchange and Production Economies
- D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty
This paper has been announced in the following NEP Reports:
- NEP-ALL-2010-01-16 (All new papers)
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