Information inefficiency in a random linear economy model

Joao Pedro Jerico and Renato Vicente

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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.

Date: 2016-10, Revised 2016-10
New Economics Papers: this item is included in nep-upt
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Persistent link: https://EconPapers.repec.org/RePEc:arx:papers:1610.01270

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