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Ignorance is bliss: rationality, information and equilibrium

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.
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Submitted on : Monday, September 29, 2014 - 12:31:29 PM
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Sylvain Barde. Ignorance is bliss: rationality, information and equilibrium. 2011. ⟨hal-01069478⟩

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