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Models of Equilibrium Pricing with Internalized Powers of Independent Judgment Based on Autonomy

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  • Aoki, Takaaki

Abstract

In this paper I want to describe one way of thinking about information. In effect, this paper relates to the notion that organizational or societal models of economic equilibrium incorporate a decision-making mechanism that is influenced by the independent judgment of each individual. This decision-making mechanism has nothing to do with the notion of acting to maximize one's expected utility under a set of exogenous prices or predictions, nor are the consequences of the decisions based on this mechanism related in any way to exogenous prices, predictions, or other parameters. In terms of information theory, the goal is to generate information and make more accurate predictions about a particular condition. However, the information itself can be fundamentally flawed. Another point is that information generated for this purpose has the feature of being irreversible. If communication is defined as a process of engaging in an economic activity while observing and analyzing information generated on the basis of the above mechanism, then it is worth considering whether communication so defined has any utility from an economic standpoint. To pursue this question, I will apply the concept postulated above to theories of economic organization and pricing, and also discuss the externality which information brings into an economy.

Suggested Citation

  • Aoki, Takaaki, 2000. "Models of Equilibrium Pricing with Internalized Powers of Independent Judgment Based on Autonomy," MPRA Paper 12649, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:12649
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    File URL: https://mpra.ub.uni-muenchen.de/12649/1/MPRA_paper_12649.pdf
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    References listed on IDEAS

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    1. Sah, Raaj Kumar & Stiglitz, Joseph E, 1986. "The Architecture of Economic Systems: Hierarchies and Polyarchies," American Economic Review, American Economic Association, vol. 76(4), pages 716-727, September.
    2. Kenneth Arrow, 1962. "Economic Welfare and the Allocation of Resources for Invention," NBER Chapters, in: The Rate and Direction of Inventive Activity: Economic and Social Factors, pages 609-626, National Bureau of Economic Research, Inc.
    3. Bikhchandani, Sushil & Hirshleifer, David & Welch, Ivo, 1992. "A Theory of Fads, Fashion, Custom, and Cultural Change in Informational Cascades," Journal of Political Economy, University of Chicago Press, vol. 100(5), pages 992-1026, October.
    4. Sah, Raaj Kumar & Stiglitz, Joseph E, 1988. "Committees, Hierarchies and Polyarchies," Economic Journal, Royal Economic Society, vol. 98(391), pages 451-470, June.
    5. Raaj Kumar Sah, 1991. "Fallibility in Human Organizations and Political Systems," Journal of Economic Perspectives, American Economic Association, vol. 5(2), pages 67-88, Spring.
    6. Abhijit V. Banerjee, 1992. "A Simple Model of Herd Behavior," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 107(3), pages 797-817.
    7. Sah, Raaj Kumar & Stiglitz, Joseph E, 1985. "Human Fallibility and Economic Organization," American Economic Review, American Economic Association, vol. 75(2), pages 292-297, May.
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    Cited by:

    1. Aoki, Takaaki, 2003. "A Simple Model of Speculation- The Welfare Analysis and Some Problems in the Decision Making Theory," MPRA Paper 12425, University Library of Munich, Germany.

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    More about this item

    Keywords

    Autonomy; Information; Interaction; Communication; Externality of Information; Herd behavior;
    All these keywords.

    JEL classification:

    • D70 - Microeconomics - - Analysis of Collective Decision-Making - - - General
    • B40 - Schools of Economic Thought and Methodology - - Economic Methodology - - - General
    • D00 - Microeconomics - - General - - - General
    • D60 - Microeconomics - - Welfare Economics - - - General
    • D80 - Microeconomics - - Information, Knowledge, and Uncertainty - - - General
    • C11 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Bayesian Analysis: General

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