IDEAS home Printed from https://ideas.repec.org/p/fce/doctra/0934.html
   My bibliography  Save this paper

The Google thought experiment: rationality, information and equilibrium in an exchange economy

Author

Listed:
  • Sylvain Barde

    (Observatoire Français des Conjonctures Économiques)

Abstract

Following 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.
(This abstract was borrowed from another version of this item.)

Suggested Citation

  • Sylvain Barde, 2009. "The Google thought experiment: rationality, information and equilibrium in an exchange economy," Documents de Travail de l'OFCE 2009-34, Observatoire Francais des Conjonctures Economiques (OFCE).
    • Handle: RePEc:fce:doctra:0934
    as

    Download full text from publisher

    File URL: http://www.ofce.sciences-po.fr/pdf/dtravail/WP2009-34.pdf
    Download Restriction: no
    ---><---

    Other versions of this item:

    References listed on IDEAS

    as
    1. Kandori, Michihiro & Serrano, Roberto & Volij, Oscar, 2008. "Decentralized trade, random utility and the evolution of social welfare," Journal of Economic Theory, Elsevier, vol. 140(1), pages 328-338, May.
    2. Foley Duncan K., 1994. "A Statistical Equilibrium Theory of Markets," Journal of Economic Theory, Elsevier, vol. 62(2), pages 321-345, April.
    3. Lawrence Blume, 1996. "Population Games," Game Theory and Information 9607001, University Library of Munich, Germany.
    4. Smith, Eric & Foley, Duncan K., 2008. "Classical thermodynamics and economic general equilibrium theory," Journal of Economic Dynamics and Control, Elsevier, vol. 32(1), pages 7-65, January.
    5. Gode, Dhananjay K & Sunder, Shyam, 1993. "Allocative Efficiency of Markets with Zero-Intelligence Traders: Market as a Partial Substitute for Individual Rationality," Journal of Political Economy, University of Chicago Press, vol. 101(1), pages 119-137, February.
    6. Eaves, James & Melvin, Michael & Mohapatra, Sandeep, 2008. "Excess demand and price formation during a Walrasian auction," Journal of Empirical Finance, Elsevier, vol. 15(3), pages 533-548, June.
    7. Monderer, Dov & Shapley, Lloyd S., 1996. "Potential Games," Games and Economic Behavior, Elsevier, vol. 14(1), pages 124-143, May.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. repec:hal:spmain:info:hdl:2441/eu4vqp9ompqllr09hc01g3029 is not listed on IDEAS
    2. repec:hal:wpspec:info:hdl:2441/eu4vqp9ompqllr09hc01g3029 is not listed on IDEAS
    3. repec:spo:wpecon:info:hdl:2441/eu4vqp9ompqllr09hc01g3029 is not listed on IDEAS
    4. Venkatasubramanian, Venkat & Luo, Yu & Sethuraman, Jay, 2015. "How much inequality in income is fair? A microeconomic game theoretic perspective," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 435(C), pages 120-138.
    5. Roland Pongou & Roberto Serrano, 2009. "A Dynamic Theory of Fidelity Networks with an Application to the Spread of HIV/AIDS," Working Papers 2009-2, Brown University, Department of Economics.
    6. Caticha, Ariel & Golan, Amos, 2014. "An entropic framework for modeling economies," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 408(C), pages 149-163.
    7. Kandori, Michihiro & Serrano, Roberto & Volij, Oscar, 2008. "Decentralized trade, random utility and the evolution of social welfare," Journal of Economic Theory, Elsevier, vol. 140(1), pages 328-338, May.
    8. Wright, Ian, 2009. "Implicit Microfoundations for Macroeconomics," Economics - The Open-Access, Open-Assessment E-Journal (2007-2020), Kiel Institute for the World Economy (IfW Kiel), vol. 3, pages 1-27.
    9. Okada, Daijiro & Tercieux, Olivier, 2012. "Log-linear dynamics and local potential," Journal of Economic Theory, Elsevier, vol. 147(3), pages 1140-1164.
    10. Sandholm, William H., 2007. "Pigouvian pricing and stochastic evolutionary implementation," Journal of Economic Theory, Elsevier, vol. 132(1), pages 367-382, January.
    11. repec:spo:wpecon:info:hdl:2441/5l6uh8ogmqildh09h56484hg0 is not listed on IDEAS
    12. Chiarella Carl & Di Guilmi Corrado, 2015. "The limit distribution of evolving strategies in financial markets," Studies in Nonlinear Dynamics & Econometrics, De Gruyter, vol. 19(2), pages 137-159, April.
    13. Sylvain Barde, 2015. "Back to the Future: Economic Self-Organisation and Maximum Entropy Prediction," Computational Economics, Springer;Society for Computational Economics, vol. 45(2), pages 337-358, February.
    14. Jangho Yang, 2017. "An Entropy-Constrained Model of Induced Technical Change with a Single Innovation Possibility Frontier," Working Papers 1714, New School for Social Research, Department of Economics.
    15. Sylvain Barde, 2011. "Ignorance is bliss: rationality, information and equilibrium," Sciences Po publications 2011-04, Sciences Po.
    16. Hofbauer,J. & Sandholm,W.H., 2001. "Evolution and learning in games with randomly disturbed payoffs," Working papers 5, Wisconsin Madison - Social Systems.
    17. Eric Smith & Duncan Foley & Benjamin Good, 2013. "Unhedgeable shocks and statistical economic equilibrium," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 52(1), pages 187-235, January.
    18. repec:hal:spmain:info:hdl:2441/5l6uh8ogmqildh09h56484hg0 is not listed on IDEAS
    19. Hofbauer,J. & Sandholm,W.H., 2001. "Evolution and learning in games with randomly disturbed payoffs," Working papers 5, Wisconsin Madison - Social Systems.
    20. Kevin Hasker, 2014. "The Emergent Seed: A Representation Theorem for Models of Stochastic Evolution and two formulas for Waiting Time," Levine's Working Paper Archive 786969000000000954, David K. Levine.
    21. Catalano, Michele & Di Guilmi, Corrado, 2019. "Uncertainty, rationality and complexity in a multi-sectoral dynamic model: The dynamic stochastic generalized aggregation approach," Journal of Economic Behavior & Organization, Elsevier, vol. 157(C), pages 117-144.
    22. Rashkovskiy, S.A., 2021. "Economic thermodynamics," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 582(C).
    23. Philippe Solal & Jacques Durieu, 2005. "Interaction on Hypergraphs," Post-Print hal-00375568, HAL.
    24. Morris, Stephen & Ui, Takashi, 2005. "Generalized potentials and robust sets of equilibria," Journal of Economic Theory, Elsevier, vol. 124(1), pages 45-78, September.
    25. repec:hal:wpspec:info:hdl:2441/5l6uh8ogmqildh09h56484hg0 is not listed on IDEAS
    26. Noe Wiener, 2018. "Measuring Labor Market Segmentation from Incomplete Data," UMASS Amherst Economics Working Papers 2018-01, University of Massachusetts Amherst, Department of Economics.

    More about this item

    JEL classification:

    • 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

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:fce:doctra:0934. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Francesco Saraceno (email available below). General contact details of provider: https://edirc.repec.org/data/ofcspfr.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.