Related papers: Evaluating gambles using dynamics
Motivated by the problem of utility allocation in a portfolio under a Markowitz mean-variance choice paradigm, we propose an allocation criterion for the variance of the sum of $n$ possibly dependent random variables. This criterion, the…
One challenge in the estimation of financial market agent-based models (FABMs) is to infer reliable insights using numerical simulations validated by only a single observed time series. Ergodicity (besides stationarity) is a strong…
We consider 2-player zero-sum stochastic games where each player controls his own state variable living in a compact metric space. The terminology comes from gambling problems where the state of a player represents its wealth in a casino.…
When predictions support decisions they may influence the outcome they aim to predict. We call such predictions performative; the prediction influences the target. Performativity is a well-studied phenomenon in policy-making that has so far…
We study a dynamical system defined by a repeated game on a 1D lattice, in which the players keep track of their gross payoffs over time in a bank. Strategy updates are governed by a Boltzmann distribution which depends on the neighborhood…
We consider a version of large population games whose players compete for resources using strategies with adaptable preferences. The system efficiency is measured by the variance of the decisions. In the regime where the system can be…
When making decisions under risk, people often exhibit behaviors that classical economic theories cannot explain. Newer models that attempt to account for these irrational behaviors often lack neuroscience bases and require the introduction…
Evolutionary game theory is a powerful mathematical framework to study how intelligent individuals adjust their strategies in collective interactions. It has been widely believed that it is impossible to unilaterally control players'…
Understanding the evolution of human social systems requires flexible formalisms for the emergence of institutions. Although game theory is normally used to model interactions individually, larger spaces of games can be helpful for modeling…
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…
One of the most celebrated results in mechanism design is Myerson's characterization of the revenue optimal auction for selling a single item. However, this result relies heavily on the assumption that buyers are indifferent to risk. In…
The game theory techniques are used to find the equilibrium of a market. Game theory refers to the ways in which strategic interactions among economic agents produce outcomes with respect to the preferences (or utilities) of those agents,…
We provide an economic interpretation of the practice consisting in incorporating risk measures as constraints in a classic expected return maximization problem. For what we call the infimum of expectations class of risk measures, we show…
This paper studies the problem of maximizing the expected utility of terminal wealth for a financial agent with an unbounded random endowment, and with a utility function which supports both positive and negative wealth. We prove the…
Our computational economic analysis investigates the relationship between inequality, mobility and the financial accumulation process. Extending the baseline model by Levy et al., we characterise the economic process through stylised return…
The concept of power among players can be expressed as a combination of their utilities. A player who obeys another takes into account the utility of the dominant one. Technically it is a matter of superimposing some weighted sum or product…
The dominant theories of rational choice assume logical omniscience. That is, they assume that when facing a decision problem, an agent can perform all relevant computations and determine the truth value of all relevant logical/mathematical…
We study how individuals trade off outcome ("what") and process ("how") utility in high-stakes strategic decisions, namely professional tennis. Using optimality conditions and the second-service rule, we derive a sufficient condition for…
We study a continuous-time expected utility maximization problem in which the investor at maturity receives the value of a contingent claim in addition to the investment payoff from the financial market. The investor knows nothing about the…
We develop a systematic approach to quantum probability as a theory of rational betting in quantum gambles. In these games of chance the agent is betting in advance on the outcomes of several (finitely many) incompatible measurements. One…