Arbeitspapier

Ignorance is bliss: Rationality, information and equilibrium

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.

Language
Englisch

Bibliographic citation
Series: School of Economics Discussion Papers ; No. 11,03

Classification
Wirtschaft
Mathematical Methods
Existence and Stability Conditions of Equilibrium
Exchange and Production Economies
Search; Learning; Information and Knowledge; Communication; Belief; Unawareness
Subject
Information theoretic measure
knapsack problem
congestion game
potential function

Event
Geistige Schöpfung
(who)
Barde, Sylvain
Event
Veröffentlichung
(who)
University of Kent, School of Economics
(where)
Canterbury
(when)
2011

Handle
Last update
20.09.2024, 8:22 AM CEST

Data provider

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Object type

  • Arbeitspapier

Associated

  • Barde, Sylvain
  • University of Kent, School of Economics

Time of origin

  • 2011

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