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 Sciences Po in its series Sciences Po publications with number 2011-04.
Date of creation: Mar 2011
Date of revision:
Information theoretic measure; knapsack problem; congestion game; potential function.;
Other versions of this item:
- Sylvain Barde, 2011. "Ignorance is bliss: rationality, information and equilibrium," Studies in Economics, Department of Economics, University of Kent 1103, Department of Economics, University of Kent.
- Sylvain Barde, 2011. "Ignorance is bliss: rationality, information and equilibrium," Documents de Travail de l'OFCE, Observatoire Francais des Conjonctures Economiques (OFCE) 2011-04, Observatoire Francais des Conjonctures Economiques (OFCE).
- 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
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.:
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- 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," Studies in Economics, Department of Economics, University of Kent 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," Documents de Travail de l'OFCE, Observatoire Francais des Conjonctures Economiques (OFCE) 2011-05, Observatoire Francais des Conjonctures Economiques (OFCE).
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