Related papers: Information equilibrium as an economic principle
Economic systems are similar with physic systems for their large number of individuals and the exist of equilibrium. In this paper, we present a model applying the equilibrium statistical model in economic systems. Consistent with…
The Glosten-Milgrom model describes a single asset market, where informed traders interact with a market maker, in the presence of noise traders. We derive an analogy between this financial model and a Szil\'ard information engine by {\em…
We develop a stochastic equilibrium model for an electricity market with asymmetric renewable energy forecasts. In our setting, market participants optimize their profits using public information about a conditional expectation of energy…
Accurate information processing is crucial both in technology and in nature. To achieve it, any information processing system needs an initial supply of resources away from thermal equilibrium. Here we establish a fundamental limit on the…
Before the massive spread of computer technology, information was far from complex. The development of technology shifted the paradigm: from individuals who faced scarce and costly information to individuals who face massive amounts of…
This paper develops a new model of business cycles. The model is economical in that it is solved with an aggregate demand-aggregate supply diagram, and the effects of shocks and policies are obtained by comparative statics. The model builds…
We study a statistical model consisting of $N$ basic units which interact with each other by exchanging a physical entity, according to a given microscopic random law, depending on a parameter $\lambda$. We focus on the equilibrium or…
Information theory provides shortcuts which allow one to deal with complex systems. The basic idea one uses for this purpose is the maximum entropy principle developed by Jaynes. However, an extension of this maximum entropy principle to…
We present a methodology for representing probabilistic relationships in a general-equilibrium economic model. Specifically, we define a precise mapping from a Bayesian network with binary nodes to a market price system where consumers and…
The ability to understand and solve high-dimensional inference problems is essential for modern data science. This article examines high-dimensional inference problems through the lens of information theory and focuses on the standard…
We relate the information exchange between two stochastic systems to the nonequilibrium entropy production in the whole system. By deriving a general formula that decomposes the total entropy production into the thermodynamic and…
An axiomatic approach to macroeconomics based on the mathematical structure of thermodynamics is presented. It deduces relations between aggregate properties of an economy, concerning quantities and flows of goods and money, prices and the…
We suggest a new approach to creation of general market equilibrium models involving economic agents with local and partial knowledge about the system and under different restrictions. The market equilibrium problem is then formulated as a…
The state of economic theory and accumulated facts from the different branches of the economic science require to analyze the concept of the description of economy systems. The economic reality generates the problems the solution of that is…
In this work we propose a statistical approach to handling sources of theoretical uncertainty in string theory models of inflation. By viewing a model of inflation as a probabilistic graph, we show that there is an inevitable information…
We provide closed-form market equilibrium formula consolidating informational imperfections and investors beliefs. Based on Merton's model, we characterize the equilibrium expected excess returns vector with incomplete information. We then…
We propose predictive information, that is information between a long past of duration T and the entire infinitely long future of a time series, as a universal order parameter to study phase transitions in physical systems. It can be used,…
We study the effects of introducing information inefficiency in a model for a random linear economy with a representative consumer. This is done by considering statistical, instead of classical, economic general equilibria. Employing two…
In speculative markets, risk-free profit opportunities are eliminated by traders exploiting them. Markets are therefore often described as "informationally efficient", rapidly removing predictable price changes, and leaving only residual…
A thermodynamic approach to the description of economic systems and processes is developed. It is shown that there is a deep analogy between the parameters of thermodynamic and economic systems (markets); so each thermodynamic parameter can…