Information inefficiency in a random linear economy model

Joao Pedro Jerico; Renato Vicente

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arXiv · 1610.01270

Information inefficiency in a random linear economy model

Joao Pedro Jerico·Renato Vicente

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Abstract

We study the effects of introducing information inefficiency in a model for a random linear economy with a representative consumer. This is done by considering statistical, instead of classical, economic general equilibria. Employing two different approaches we show that inefficiency increases the consumption set of a consumer but decreases her expected utility. In this scenario economic activity grows while welfare shrinks, that is the opposite of the behavior obtained by considering a rational consumer.

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Joao Pedro Jerico, Renato Vicente. 2016-10-05. Information inefficiency in a random linear economy model. https://arxiv.org/abs/1610.01270

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