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Econophysics provides a strategy for understanding the potential mechanisms underlying the anomalous distribution of wealth found in real societies. We present a computational nonlinear stochastic model for the distribution of wealth that…
We consider the problem of optimal consumption from labor income and investment in a general incomplete semimartingale market. The economic agent cannot borrow against future income, so the total wealth is required to be positive at (all or…
How should central banks optimally aggregate sectoral inflation rates in the presence of imperfect labor mobility across sectors? We study this issue in a two-sector New-Keynesian model and show that a lower degree of sectoral labor…
Using a semi-structural approach, the paper identifies how heterogeneity and financial frictions affect the transmission of aggregate shocks. Approximating a heterogeneous agent model around the representative agent allocation can…
Opportunities such as higher education can promote intergenerational mobility, leading individuals to achieve levels of socioeconomic status above that of their parents. We develop a dynamic model for allocating such opportunities in a…
The comparative statics of the optimal portfolios across individuals is carried out for a continuous-time complete market model, where the risky assets price process follows a joint geometric Brownian motion with time-dependent and…
We study optimal proportional reinsurance and investment strategies for an insurance company which experiences both ordinary and catastrophic claims and wishes to maximize the expected exponential utility of its terminal wealth. We propose…
We revisit the connection between bargaining and equilibrium in exchange economies, and study its algorithmic implications. We consider bargaining outcomes to be allocations that cannot be blocked (i.e., profitably re-traded) by coalitions…
We study Pareto-optimal risk sharing in economies with heterogeneous attitudes toward risk, where agents' preferences are modeled by distortion risk measures. Building on comonotonic and counter-monotonic improvement results, we show that…
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…
We study a large economy in which firms cannot compute exact solutions to the non-linear equations that characterize the equilibrium price at which they can sell future output. Instead, firms use polynomial expansions to approximate prices.…
This paper is based on the premise that economic growth is driven by an interplay between innovation and imitation in an economy composed of interacting firms operating in a stochastic environment. A novel approach to modeling imitation is…
The computational costs of inference and planning have confined Bayesian model-based reinforcement learning to one of two dismal fates: powerful Bayes-adaptive planning but only for simplistic models, or powerful, Bayesian non-parametric…
In our multi-agent model agents generate wealth from repeated interactions for which a prisoner's dilemma payoff matrix is assumed. Their gains are taxed by a government at a rate $\alpha$. The resulting budget is spent to cover…
At the zero lower bound, the New Keynesian model predicts that output and inflation collapse to implausibly low levels, and that government spending and forward guidance have implausibly large effects. To resolve these anomalies, we…
We study the effects of financial shocks on the United States economy by using a Bayesian structural vector autoregressive (SVAR) model that exploits the non-normalities in the data. We use this method to uniquely identify the model and…
The purpose of this paper is to advance the understanding of the conditions that give rise to flash crash contagion, particularly with respect to overlapping asset portfolio crowding. To this end, we designed, implemented, and assessed a…
We study the power of item-pricing as a tool for approximately optimizing social welfare in a combinatorial market. We consider markets with $m$ indivisible items and $n$ buyers. The goal is to set prices to the items so that, when agents…
We study the problem of robust forecast aggregation: combining expert forecasts with provable accuracy guarantees compared to the best possible aggregation of the underlying information. Prior work shows strong impossibility results, e.g.…
Most work in mechanism design assumes that buyers are risk neutral; some considers risk aversion arising due to a non-linear utility for money. Yet behavioral studies have established that real agents exhibit risk attitudes which cannot be…