# Back to the Future: Economic Self-Organisation and Maximum Entropy Prediction

Barde, Sylvain (2014) Back to the Future: Economic Self-Organisation and Maximum Entropy Prediction. Computational Economics, 45 (2). pp. 337-358. ISSN 0927-7099. E-ISSN 1572-9974. (doi:10.1007/s10614-014-9422-2)

PDF - Author's Accepted Manuscript
 Preview
Official URL
http://dx.doi.org/10.1007/s10614-014-9422-2

## Abstract

This paper shows that signal restoration methodology is appropriate for predicting the equilibrium state of certain economic systems. A formal justification for this is provided by proving the existence of finite improvement paths in object allocation problems under weak assumptions on preferences, linking any initial condition to a Nash equilibrium. Because a finite improvement path is made up of a sequence of systematic best-responses, backwards movement from the equilibrium back to the initial condition can be treated like the realisation of a noise process. This underpins the use of signal restoration to predict the equilibrium from the initial condition, and an illustration is provided through an application of maximum entropy signal restoration to the Schelling model of segregation.

Item Type: Article 10.1007/s10614-014-9422-2 Information entropy; Self-organisation; Potential function; Schelling segregation H Social Sciences > HB Economic TheoryQ Science > Operations Research - Theory Faculties > Social Sciences > School of Economics Sylvain Barde 16 Jul 2014 16:21 UTC 29 May 2019 12:48 UTC https://kar.kent.ac.uk/id/eprint/41872 (The current URI for this page, for reference purposes) https://orcid.org/0000-0003-1465-8236