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Ignorance is bliss: rationality, information and equilibrium

Author

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  • Sylvain Barde

    (University of Kent)

Abstract

An 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.
(This abstract was borrowed from another version of this item.)

Suggested Citation

  • Sylvain Barde, 2011. "Ignorance is bliss: rationality, information and equilibrium," Documents de Travail de l'OFCE 2011-04, Observatoire Francais des Conjonctures Economiques (OFCE).
    • Handle: RePEc:fce:doctra:1104
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    File URL: http://www.ofce.sciences-po.fr/pdf/dtravail/WP2011-04.pdf
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    Cited by:

    1. repec:spo:wpmain:info:hdl:2441/5l6uh8ogmqildh09h5623b6bg is not listed on IDEAS
    2. 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).
    3. repec:spo:wpecon:info:hdl:2441/5l6uh8ogmqildh09h5623b6bg is not listed on IDEAS

    More about this item

    JEL classification:

    • 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; Information and Knowledge; Communication; Belief; Unawareness

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