Ignorance is bliss: rationality, information and equilibrium
AbstractAn information-theoretic thought experiment is developed to provide a methodology for predicting endowment distributions in the absence of information on agent preferences. The allocation problem is first presented as a stylised knapsack problem. Although this knapsack allocation is intractable, the social planner can nevertheless make precise predictions concerning the endowment distribution by using its information-theoretic structure. By construction these predictions do not rest on the rationality of agents. It is also shown, however, that the knapsack problem is equivalent to a congestion game under weak assumptions, which means that the planner can nevertheless evaluate the optimality of the unobserved allocation.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoPaper provided by Observatoire Francais des Conjonctures Economiques (OFCE) in its series Documents de Travail de l'OFCE with number 2011-04.
Date of creation: Mar 2011
Date of revision:
Other versions of this item:
- Sylvain Barde, 2011. "Ignorance is bliss: rationality, information and equilibrium," Sciences Po publications 2011-04, Sciences Po.
- Sylvain Barde, 2011. "Ignorance is bliss: rationality, information and equilibrium," Studies in Economics 1103, Department of Economics, University of Kent.
- 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
- D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search, Learning, and Information
This paper has been announced in the following NEP Reports:
- NEP-ALL-2011-06-18 (All new papers)
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Alexis Toda, 2010. "Existence of a statistical equilibrium for an economy with endogenous offer sets," Economic Theory, Springer, vol. 45(3), pages 379-415, December.
- Mantel, Rolf R., 1974. "On the characterization of aggregate excess demand," Journal of Economic Theory, Elsevier, vol. 7(3), pages 348-353, March.
- 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 119-37, February.
- Sonnenschein, Hugo, 1972. "Market Excess Demand Functions," Econometrica, Econometric Society, vol. 40(3), pages 549-63, May.
- Debreu, Gerard, 1974. "Excess demand functions," Journal of Mathematical Economics, Elsevier, vol. 1(1), pages 15-21, March.
- Mhand Hifi & Slim Sadfi & Abdelkader Sbihi, 2004. "An exact algorithm for the multiple-choice multidimensional knapsack problem," Cahiers de la Maison des Sciences Economiques b04024, Université Panthéon-Sorbonne (Paris 1).
- Foley Duncan K., 1994. "A Statistical Equilibrium Theory of Markets," Journal of Economic Theory, Elsevier, vol. 62(2), pages 321-345, April.
- repec:spo:wpecon:info:hdl:2441/5l6uh8ogmqildh09h5623b6bg is not listed on IDEAS
- Sylvain Barde, 2011.
"Back to the Future: A Simple Solution to Schelling Segregation,"
ERSA conference papers
ersa11p862, European Regional Science Association.
- Sylvain Barde, 2011. "Back to the future: a simple solution to schelling segregation," Sciences Po publications 2011-05, Sciences Po.
- Sylvain Barde, 2011. "Back to the future: a simple solution to schelling segregation," Documents de Travail de l'OFCE 2011-05, Observatoire Francais des Conjonctures Economiques (OFCE).
- Sylvain Barde, 2011. "Back to the Future: A Simple Solution to Schelling Segregation," Studies in Economics 1104, Department of Economics, University of Kent.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Francesco Saraceno).
If references are entirely missing, you can add them using this form.