Year: 2025
Type: preprint
Abstract: We show that, in large population games, decentralized information aggregation generically corrects for individual-level biases. This establishes a new testable aggregate efficiency benchmark where the behavior of boundedly rational agents mimics that of fully rational agents. However, we find that structural economic forces such as strategic network formation and profit-maximizing platforms can systematically select pathological environments to exploit individuals' biases, thereby causing aggregate inefficiencies. We characterize these inefficiencies in monopoly and labor markets. Our findings therefore suggest that policy should shift focus from correcting individuals' behavior to monitoring and regulating information structures.
Source: arXiv (Cornell University)
Author: Mudekereza, Florian
Institution: Moscow Institute of Thermal Technology
Language: English
Topic: Game Theory and Applications
Field: Decision Sciences
Domain: Social Sciences
Open Access status: green
OpenAlex ID: W4406780064