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Models of Equilibrium Pricing with Internalized Powers of Independent Judgment Based on Autonomy

  • Aoki, Takaaki

In this paper I want to describe one way of thinking about information. In effect, this paper relates to the notion that organizational or societal models of economic equilibrium incorporate a decision-making mechanism that is influenced by the independent judgment of each individual. This decision-making mechanism has nothing to do with the notion of acting to maximize one's expected utility under a set of exogenous prices or predictions, nor are the consequences of the decisions based on this mechanism related in any way to exogenous prices, predictions, or other parameters. In terms of information theory, the goal is to generate information and make more accurate predictions about a particular condition. However, the information itself can be fundamentally flawed. Another point is that information generated for this purpose has the feature of being irreversible. If communication is defined as a process of engaging in an economic activity while observing and analyzing information generated on the basis of the above mechanism, then it is worth considering whether communication so defined has any utility from an economic standpoint. To pursue this question, I will apply the concept postulated above to theories of economic organization and pricing, and also discuss the externality which information brings into an economy.

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Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 12649.

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Date of creation: Feb 2000
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Handle: RePEc:pra:mprapa:12649
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  1. Sushil Bikhchandani & David Hirshleifer & Ivo Welch, 2010. "A theory of Fads, Fashion, Custom and cultural change as informational Cascades," Levine's Working Paper Archive 1193, David K. Levine.
  2. Sah, Raaj Kumar & Stiglitz, Joseph E, 1986. "The Architecture of Economic Systems: Hierarchies and Polyarchies," American Economic Review, American Economic Association, vol. 76(4), pages 716-27, September.
  3. Sah, Raaj Kumar & Stiglitz, Joseph E, 1988. "Committees, Hierarchies and Polyarchies," Economic Journal, Royal Economic Society, vol. 98(391), pages 451-70, June.
  4. Sah, Raaj Kumar & Stiglitz, Joseph E, 1985. "Human Fallibility and Economic Organization," American Economic Review, American Economic Association, vol. 75(2), pages 292-97, May.
  5. Banerjee, Abhijit V, 1992. "A Simple Model of Herd Behavior," The Quarterly Journal of Economics, MIT Press, vol. 107(3), pages 797-817, August.
  6. Sah, R.K., 1991. "Fallibility In Human Organizations And Political Systems," Papers 625, Yale - Economic Growth Center.
  7. Kenneth Arrow, 1962. "Economic Welfare and the Allocation of Resources for Invention," NBER Chapters, in: The Rate and Direction of Inventive Activity: Economic and Social Factors, pages 609-626 National Bureau of Economic Research, Inc.
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