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Information inefficiency in a random linear economy model

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  • Joao Pedro Jerico
  • Renato Vicente

Abstract

We study the effects of introducing information inefficiency in a model for a random linear economy with a representative consumer. This is done by considering statistical, instead of classical, economic general equilibria. Employing two different approaches we show that inefficiency increases the consumption set of a consumer but decreases her expected utility. In this scenario economic activity grows while welfare shrinks, that is the opposite of the behavior obtained by considering a rational consumer.

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  • Joao Pedro Jerico & Renato Vicente, 2016. "Information inefficiency in a random linear economy model," Papers 1610.01270, arXiv.org, revised Oct 2016.
  • Handle: RePEc:arx:papers:1610.01270
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    File URL: http://arxiv.org/pdf/1610.01270
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