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Aggregate Efficiency in Games

Author

Listed:
  • Florian Mudekereza

Abstract

We show that, in large population games, decentralized information aggregation generically corrects for individual-level biases. This establishes a new testable aggregate efficiency benchmark where the behavior of boundedly rational agents mimics that of fully rational agents. However, we find that structural economic forces such as strategic network formation and profit-maximizing platforms can systematically select pathological environments to exploit individuals' biases, thereby causing aggregate inefficiencies. We characterize these inefficiencies in monopoly and labor markets. Our findings therefore suggest that policy should shift focus from correcting individuals' behavior to monitoring and regulating information structures.

Suggested Citation

  • Florian Mudekereza, 2025. "Aggregate Efficiency in Games," Papers 2501.13019, arXiv.org, revised Feb 2026.
    • Handle: RePEc:arx:papers:2501.13019
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    References listed on IDEAS

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