Related papers: Information equilibrium as an economic principle

We review with a tutorial scope the information theory foundations of quantum statistical physics. Only a small proportion of the variables that characterize a system at the microscopic scale can be controlled, for both practical and…

Identifying the origin of nonequilibrium characteristics in a generic interacting system having multiple degrees of freedom is a challenging task. In this context, information theoretic measures such as mutual information and related…

Following a long tradition of physicists who have noticed that the Ising model provides a general background to build realistic models of social interactions, we study a model of financial price dynamics resulting from the collective…

While information theory has been introduced to characterize the fundamental limitations of control and filtering for a few decades, the existing information-theoretic methods are indirect and cumbersome for analyzing the limitations of…

We study a class of heterogeneous agent-based models which are based on a basic set of principles, and the most fundamental operations of an economic system: trade and product transformations. A basic guiding principle is scale invariance,…

When additional information sources are available in decision making problems that allow stochastic optimization formulations, an important question is how to optimally use the information the sources are capable of providing. A framework…

This paper studies the economic role of persistent dispersion in allocations across agents. We develop a tractable model in which firms allocate resources under imperfect information and behavioral updating, generating sustained…

Many complex systems exhibit extreme events far more often than expected for a normal distribution. This work examines how self-similar bursts of activity across several orders of magnitude can emerge from first principles in systems that…

Information is replicable in that it can be simultaneously consumed and sold to others. We study how resale affects a decentralized market for information. We show that even if the initial seller is an informational monopolist, she captures…

We formulate an equilibrium model of intraday trading in electricity markets. Agents face balancing constraints between their customers consumption plus intraday sales and their production plus intraday purchases. They have continuously…

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…

Foundations of equilibrium thermodynamics are the equation of state (EoS) and four postulated laws of thermodynamics. We use equilibrium thermodynamics paradigms in constructing the EoS for microeconomics system that is a market. This…

We study the equilibrium states of energy functions involving a large set of real variables, defined on the links of sparsely connected networks, and interacting at the network nodes, using the cavity and replica methods. When applied to…

This paper focuses on the convergence of infor- mation in distributed systems of agents communicating over a network. The information on which the convergence is sought is not represented by real numbers, rather by sets of real numbers,…

General Equilibrium Theory is the benchmark of economics, especially its results concerning the efficient allocation of resources, known as the First and Second Welfare Theorems. Yet, General Equilibrium Theory is beyond the scope of most…

We introduce a new cost function over experiments, f-information, based on the theory of multivariate statistical divergences, that generalizes Sims's classic model of rational inattention as well as the class of posterior-separable cost…

The capacity to integrate information is a prominent feature of biological and cognitive systems. Integrated Information Theory (IIT) provides a mathematical approach to quantify the level of integration in a system, yet its computational…

The efficient market hypothesis (EMH) famously stated that prices fully reflect the information available to traders. This critically depends on the transfer of information into prices through trading strategies. Traders optimise their…

In this article, we review a general theoretical framework of thermodynamics of information on the basis of Bayesian networks. This framework can describe a broad class of nonequilibrium dynamics of multiple interacting systems with complex…

We develop a tractable macroeconomic model that captures dynamic behaviors across multiple timescales, including business cycles. The model is anchored in a dynamic capital demand framework reflecting an interactions-based process whereby…