Related papers: Elasticity theory of structuring
The transitivity of preferences is one of the basic assumptions used in the theory of games and decisions. It is often equated with rationality of choice and is considered useful in building rankings. Intransitive preferences are considered…
Video game designers often view confusion as undesirable, yet it is inevitable, as new players must adapt to new interfaces and mechanics in an increasingly varied and innovative game market, which is more popular than ever. Research…
Stylized facts can be regarded as constraints for any modeling attempt of price dynamics on a financial market, in that an empirically reasonable model has to reproduce these stylized facts at least qualitatively. The dynamics of market…
The theory of combinatorial game (like board games) and the theory of social games (where one looks for Nash equilibria) are normally considered as two separate theories. Here we shall see what comes out of combining the ideas. The central…
We consider the problem of designing a derivatives exchange aiming at addressing clients needs in terms of listed options and providing suitable liquidity. We proceed into two steps. First we use a quantization method to select the options…
We investigate the problem of gambling with uncertainty in outcome probabilities. Stochastic optimization models are proposed for optimal investing on events with mutually exclusive outcomes when probabilities are estimated using…
The use of equilibrium models in economics springs from the desire for parsimonious models of economic phenomena that take human reasoning into account. This approach has been the cornerstone of modern economic theory. We explain why this…
Reliability analysis is a sub-field of uncertainty quantification that assesses the probability of a system performing as intended under various uncertainties. Traditionally, this analysis relies on deterministic models, where experiments…
This paper develops a dynamic monetary model to study the (in)stability of the fractional reserve banking system. The model shows that the fractional reserve banking system can endanger stability in that equilibrium is more prone to exhibit…
This paper investigates the dynamics of gambling and how they can affect risk-taking behavior in regions not explored by Kahneman and Tversky's Prospect Theory. Specifically, it questions why extreme outcomes do not fit the theory and…
Modern economies evolved from simpler human exchanges into very convoluted systems. Today, a multitude of aspects can be regulated, tampered with, or left to chance; these are economic {\em degrees of freedom} which together shape the flow…
In this paper, we present a method of estimating the volatility of a signal that displays stochastic noise (such as a risky asset traded on an open market) utilizing Linear Predictive Coding. The main purpose is to associate volatility with…
We propose a stylized model of production and exchange in which long-term investors set their production decision over a horizon {\tau} , the "time to produce", and are liquidity constrained, while financial investors trade over a much…
Nearly-elastic model systems with one or two degrees of freedom are considered: the system is undergoing a small loss of energy in each collision with the "wall". We show that instabilities in this purely deterministic system lead to…
Stochastic dominance is a crucial tool for the analysis of choice under risk. It is typically analyzed as a property of two gambles that are taken in isolation. We study how additional independent sources of risk (e.g. uninsurable labor…
Noncooperative games with uncertain payoffs have been classically studied under the expected-utility theory framework, which relies on the strong assumption that agents behave rationally. However, simple experiments on human decision makers…
Improving algorithms via predictions is a very active research topic in recent years. This paper initiates the systematic study of mechanism design in this model. In a number of well-studied mechanism design settings, we make use of…
We conducted a laboratory experiment involving human subjects to test the theoretical hypothesis that equilibrium selection can be impacted by manipulating the games dynamics process, by using modern control theory. Our findings indicate…
This essay discusses the advantages of a probabilistic agent-based approach to questions in theoretical economics, from the nature of economic agents, to the nature of the equilibria supported by their interactions. One idea we propose is…
This paper tackles challenges in pricing and revenue projections due to consumer uncertainty. We propose a novel data-based approach for firms facing unknown consumer type distributions. Unlike existing methods, we assume firms only observe…