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Ignorance is bliss: rationality, information and equilibrium

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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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hal-01069478 , version 1 (29-09-2014)

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Sylvain Barde. Ignorance is bliss: rationality, information and equilibrium. 2011. ⟨hal-01069478⟩
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