EconPapers    
Economics at your fingertips  
 

Back to the future: economic rationality and maximum entropy prediction

Sylvain Barde ()

Studies in Economics from School of Economics, University of Kent

Abstract: An information-theoretic thought experiment is developed to clarify why the maximum entropy methodology is appropriate for predicting the equilibrium state of economic systems. As a first step, object allocation problems, modeled as knapsack problems, are shown to be equivalent to congestion games under weak assumptions. This proves the existence of finite improvement paths linking initial conditions and Nash equilibria. The existence of these improvement paths is precisely what enables the use of maximum entropy to make predictions concerning the equilibrium state. Finally an illustration of this predictive power is provided through an application to the Schelling model of segregation.

Keywords: Information entropy; knapsack problem; potential function; Schelling segregation. (search for similar items in EconPapers)
JEL-codes: C02 C11 C63 D80 (search for similar items in EconPapers)
Date: 2012-01
New Economics Papers: this item is included in nep-upt
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3) Track citations by RSS feed

Downloads: (external link)
https://www.kent.ac.uk/economics/repec/1202.pdf (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:ukc:ukcedp:1202

Ordering information: This working paper can be ordered from

Access Statistics for this paper

More papers in Studies in Economics from School of Economics, University of Kent School of Economics, University of Kent, Canterbury, Kent, CT2 7FS.
Bibliographic data for series maintained by Tracey Girling ().

 
Page updated 2021-04-30
Handle: RePEc:ukc:ukcedp:1202