Related papers: Non-Equivalent Beliefs and Subjective Equilibrium …
We present a model of opinion dynamics in which agents adjust continuous opinions as a result of random binary encounters whenever their difference in opinion is below a given threshold. High thresholds yield convergence of opinions towards…
We propose two rational expectation models of transient financial bubbles with heterogeneous arbitrageurs and positive feedbacks leading to self-reinforcing transient stochastic faster-than-exponential price dynamics. As a result of the…
Keeping a basic tenet of economic theory, rational expectations, we model the nonlinear positive feedback between agents in the stock market as an interplay between nonlinearity and multiplicative noise. The derived hyperbolic stochastic…
The formation of agents' opinions in a social system is the result of an intricate equilibrium among several driving forces. On the one hand, the social pressure exerted by peers favours the emergence of local consensus. On the other hand,…
In both finance and economics, quantitative models are usually studied as isolated mathematical objects --- most often defined by very strong simplifying assumptions concerning rationality, efficiency and the existence of disequilibrium…
There are several aspects of data markets that distinguish them from a typical commodity market: asymmetric information, the non-rivalrous nature of data, and informational externalities. Formally, this gives rise to a new class of games…
Large dynamic economies with heterogeneous agents and aggregate shocks are central to many important applications, yet their equilibrium analysis remains computationally challenging. This is because the standard solution approach, rational…
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…
This paper introduces a heterogeneous multidimensional bounded confidence (BC) opinion dynamics with random pairwise interactions, whereby each pair of agents accesses each other's opinions with a specific probability. This revised model is…
Opinions and beliefs determine the evolution of social systems. This is of particular interest in finance, as the increasing complexity of financial systems is coupled with information overload. Opinion formation, therefore, is not always…
We consider an investor who, while maximizing his/her expected utility, also compares the outcome to a reference entity. We recall the notion of personal equilibrium and show that, in a multistep, generically incomplete financial market…
We study strategic interactions between firms with heterogeneous beliefs about future climate impacts. To that end, we propose a Cournot-type equilibrium model where firms choose mitigation efforts and production quantities such as to…
We introduce the Estimated Dynamic Equilibrium Model (EDEM), an agent-based framework that treats supply and demand as a coupled stochastic process driven by heterogeneous, noisy agent valuations. The model's primary technical contribution…
In the present paper a model of a market consisting of real and financial interacting sectors is studied. Agents populating the stock market are assumed to be not able to observe the true underlying fundamental, and their beliefs are biased…
We introduce and formalize misalignment, a phenomenon of interactive environments perceived from an analyst's perspective where an agent holds beliefs about another agent's beliefs that do not correspond to the actual beliefs of the latter.…
We study the risk assessment of uncertain cash flows in terms of dynamic convex risk measures for processes as introduced in Cheridito, Delbaen, and Kupper (2006). These risk measures take into account not only the amounts but also the…
This paper investigates the asymptotic behavior of some common opinion dynamic models in a continuum of agents. We show that as long as the interactions among the agents are symmetric, the distribution of the agents' opinion converges. We…
Large variations in stock prices happen with sufficient frequency to raise doubts about existing models, which all fail to account for non-Gaussian statistics. We construct simple models of a stock market, and argue that the large…
We consider a class of generalized capital asset pricing models in continuous time with a finite number of agents and tradable securities. The securities may not be sufficient to span all sources of uncertainty. If the agents have…
Network effects are the added value derived solely from the popularity of a product in an economic market. Using agent-based models inspired by statistical physics, we propose a minimal theory of a competitive market for (nearly)…