Related papers: Bubbles are rational
Modeling the purposeful behavior of imperfect agents from a small number of observations is a challenging task. When restricted to the single-agent decision-theoretic setting, inverse optimal control techniques assume that observed behavior…
In dynamic settings each economic agent's choices can be revealing of her private information. This elicitation via the rationalization of observable behavior depends each agent's perception of which payoff-relevant contingencies other…
The sequential equilibrium is a standard solution concept for extensive-form games with imperfect information that includes an explicit representation of the players' beliefs. An assessment consisting of a strategy and a belief is a…
Compositional Game Theory is a new, recently introduced model of economic games based upon the computer science idea of compositionality. In it, complex and irregular games can be built up from smaller and simpler games, and the equilibria…
Given entropy's central role in multiple areas of physics and science, one important task is to develop a systematic and unifying approach to defining entropy. Games of chance become a natural candidate for characterising the uncertainty of…
This paper demonstrates the existence of a finite set of equilibria in the case of the indeterminacy of linear rational expectations models. The number of equilibria corresponds to the number of ways to select n eigenvectors among a larger…
Rational pure bubble models feature multiple (and often a continuum of) equilibria, which makes model predictions and policy analyses non-robust. We show that when the interest rate in the fundamental equilibrium is below the economic…
Although classical economic theory is based on the concept of stable equilibrium, real economic systems appear to be always out of equilibrium. Indeed, they share many of the dynamical features of other complex systems, e.g., ecological…
The efficient market hypothesis (EMH), based on rational expectations and market equilibrium, is the dominant perspective for modelling economic markets. However, the most notable critique of the EMH is the inability to model periods of…
We consider a simple model of rational agents competing in a single product market described by simple linear demand curve. Contrary to accepted economic theory, the agents' production levels synchronise in the absence of conscious…
What is the emergent long-run equilibrium of a society where many interacting agents bet on the optimal energy to put in place in order to climb on the Bandwagon? In this paper we study the collective behavior of a large population of…
The noncooperative Nash equilibrium solution of classical games corresponds to a rational expectations attitude on the part of the players. However, in many cases, games played by human players have outcomes very different from Nash…
We study multi-player games with perfect information and general payoff function, where the set of stages is the set of non-positive integers $\{\ldots,-2,-1,0\}$. We define two related equilibrium concepts: one considering only deviations…
Bounded rationality refers to the non-optimal rationality of players in non-cooperative games. In a networked game, the bounded rationality of players may be heterogeneous and spatially distributed. It has been shown that the `system…
We present a subjective equilibrium notion (called "subjective equilibrium under beliefs of exogenous uncertainty (SEBEU)" for stochastic dynamic games in which each player chooses her decisions under the (incorrect) belief that a…
Modeling the purposeful behavior of imperfect agents from a small number of observations is a challenging task. When restricted to the single-agent decision-theoretic setting, inverse optimal control techniques assume that observed behavior…
In this paper, we introduce a novel equilibrium concept, called the equilibrium cycle, which seeks to capture the outcome of oscillatory game dynamics. Unlike the (pure) Nash equilibrium, which defines a fixed point of mutual best…
Strategic-form min-max game theory examines the existence, multiplicity, selection of equilibria, and the worst-case computational complexity under perfect rationality. However, in many applications, games are drawn from an ensemble, and…
Asset price bubbles are situations where asset prices exceed the fundamental values defined by the present value of dividends. This paper presents a conceptually new perspective: the necessity of bubbles. We establish the Bubble Necessity…
Various formulations of counterfactual general equilibrium in economies -- systems of actors manipulating economic goods -- are logically and mathematically analyzed. Evenly-rotating economies are systems whose evolution is stable, steady,…