Related papers: The professional trader's paradox
This paper describes Simpson's paradox, and explains its serious implications for randomised control trials. In particular, we show that for any number of variables we can simulate the result of a controlled trial which uniformly points to…
Well known Simpson's paradox is puzzling and surprising for many, especially for the empirical researchers and users of statistics. However there is no surprise as far as mathematical details are concerned. A lot more is written about the…
We discuss a method for predicting financial movements and finding pockets of predictability in the price-series, which is built around inferring the heterogeneity of trading strategies in a multi-agent trader population. This work explores…
We formalize the paradox of an omniscient yet lazy investor - a perfectly informed agent who trades infrequently due to execution or computational frictions. Starting from a deterministic geometric construction, we derive a closed-form…
In many social dilemmas, individuals tend to generate a situation with low payoffs instead of a system optimum ("tragedy of the commons"). Is the routing of traffic a similar problem? In order to address this question, we present…
In the game of Matching Pennies, Alice and Bob each hold a penny, and at every tick of the clock they simultaneously display the head or the tail sides of their coins. If they both display the same side, then Alice wins Bob's penny; if they…
The principle that rational agents should maximize expected utility or choiceworthiness is intuitively plausible in many ordinary cases of decision-making under uncertainty. But it is less plausible in cases of extreme, low-probability risk…
We show in a simulation when economic agents are subject to evolution (random change and selection based on the success in the estimation of the result of the gamble) they acquire risk aversive behavior. This behavior appears in the form of…
Prediction markets are useful for estimating probabilities of claims whose truth will be revealed at some fixed time -- this includes questions about the values of real-world events (i.e. statistical uncertainty), and questions about the…
We conduct an incentivized experiment on a nationally representative US sample \\ (N=708) to test whether people prefer to avoid ambiguity even when it means choosing dominated options. In contrast to the literature, we find that 55\% of…
Finding a counterfeit coin with the different weight from a set of visually identical coin using a balance, usually a two-armed balance, known as the balance question, is an intersting and inspiring question. Its variants involve…
Faced with a sequence of N binary events, such as coin flips (or Ising spins), it is natural to ask whether these events reflect some underlying dynamic signals or are just random. Plausible models for the dynamics of hidden biases lead to…
Cooperation between individuals is emergent in all parts of society, yet mechanistic reasons for this emergence is ill understood in the literature. A specific example of this is insurance. Recent work has, though, shown that assuming the…
In this paper we study the price dynamics in a simple model of financial markets with heterogeneous agents. We concentrate on how increases in the total number of active traders influences fluctuations of asset prices. We find that a…
We consider two-person bargaining problems in which (only) the disagreement outcome is private (and possibly correlated) information and it is common knowledge that disagreement is inefficient. We show that if the Pareto frontier is linear,…
The Drinker Paradox is as follows. In every nonempty tavern, there is a person such that if that person is drinking, then everyone in the tavern is drinking. Formally, \[ \exists x \big(\varphi \rightarrow \forall y \varphi[x/y]\big) \ . \]…
We study the problem of prediction of binary sequences with expert advice in the online setting, which is a classic example of online machine learning. We interpret the binary sequence as the price history of a stock, and view the predictor…
Opportunities, such as access to education or family background, shape income inequality by influencing the chances of economic success. Unequal opportunities create uncertainty about whether success is merit- or luck-based. We examine how…
Recently, Press and Dyson have proposed a new class of probabilistic and conditional strategies for the two-player iterated Prisoner's Dilemma, so-called zero-determinant strategies. A player adopting zero-determinant strategies is able to…
In a non-cooperative game, players do not communicate with each other. Their only feedback is the payoff they receive resulting from the strategies they execute. It is important to note that within each level set of the total payoff…