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Ignorance is bliss: rationality, information and equilibrium

Sylvain Barde ()

Studies in Economics from School of Economics, 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.

Keywords: Information theoretic measure; knapsack problem; congestion game; potential function (search for similar items in EconPapers)
JEL-codes: C62 D51 D83 (search for similar items in EconPapers)
Date: 2011-02
New Economics Papers: this item is included in nep-gth
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Working Paper: Ignorance is bliss: rationality, information and equilibrium (2011) Downloads
Working Paper: Ignorance is bliss: rationality, information and equilibrium (2011) Downloads
Working Paper: Ignorance is bliss: rationality, information and equilibrium (2011) Downloads
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