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.
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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 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.
- 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)
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"Back to the Future: A Simple Solution to Schelling Segregation,"
Studies in Economics
1104, Department of Economics, University of Kent.
- 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," ERSA conference papers ersa11p862, European Regional Science Association.
- 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).
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