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Title:Ignorance is bliss: Rationality, information and equilibrium PDF Logo
Authors:Barde, Sylvain
Issue Date:2011
Series/Report no.:School of Economics discussion papers 11,03
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.
Subjects:Information theoretic measure
knapsack problem
congestion game
potential function
JEL:C02
C62
D51
D83
Document Type:Working Paper
Appears in Collections:School of Economics Discussion Papers, University of Kent

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