Related papers: The professional trader's paradox
We present some new analytical expressions for the so-called Parrondo effect, where simple coin-flipping games with negative expected value are combined into a winning game. Parrondo games are state-dependent. By identifying the game state…
We investigate joint probabilistic choice rules describing the behavior of two decision makers, each facing potentially distinct menus. These rules are separable when they can be decomposed into individual choices correlated solely through…
In this paper, we provide theoretical and empirical estimates for the likelihood of a negative participation paradox under instant runoff voting in three-candidate elections. We determine the probability of the paradox and related…
Toral introduced so-called cooperative Parrondo games, in which there are N players (3 or more) arranged in a circle. At each turn one player is randomly chosen to play. He plays either game A or game B. Game A results in a win or loss of…
Constant and symmetric price impact functions, most commonly used in agent-based market modelling, are shown to give rise to paradoxical and inconsistent outcomes in the simplest case of arbitrage exploitation when open-hold-close actions…
In the last few decades, numerous experiments have shown that humans do not always behave so as to maximize their material payoff. Cooperative behavior when non-cooperation is a dominant strategy (with respect to the material payoffs) is…
The takeoff point for this paper is the voluminous body of literature addressing recursive betting games with expected logarithmic growth of wealth being the performance criterion. Whereas almost all existing papers involve use of linear…
This paper provides an analysis of different formal representations of beliefs in epistemic game theory. The aim is to attempt a synthesis of different structures of beliefs in the presence of indeterminate probabilities. Special attention…
Parrondo's paradox occurs in sequences of games in which a winning expectation may be obtained by playing the games in a random order, even though each game in the sequence may be lost when played individually. Several variations of…
Human decision behaviour is quite diverse. In many games humans on average do not achieve maximal payoff and the behaviour of individual players remains inhomogeneous even after playing many rounds. For instance, in repeated prisoner…
In this work, we proposed a new $N$-person game in which the players can bet on two options, for example represented by two boxers. Some of the players have privileged information about the boxers and part of them can provide this…
Parrondo's paradox was introduced by Juan Parrondo in 1996. In game theory, this paradox is described as: A combination of losing strategies becomes a winning strategy. At first glance, this paradox is quite surprising, but we can easily…
It is known that repeated gambling over the outcomes of independent and identically distributed (i.i.d.) random variables gives rise to alternate operational meaning of entropies in the classical case in terms of the doubling rates. We give…
We consider games with two antagonistic players --- \'Elo\"ise (modelling a program) and Ab\'elard (modelling a byzantine environment) --- and a third, unpredictable and uncontrollable player, that we call Nature. Motivated by the fact that…
This article is a prologue to the article "Why Markets are Inefficient: A Gambling 'Theory' of Financial Markets for Practitioners and Theorists." It presents important background for that article --- why gambling is important, even…
This paper proposes a theory of stock market predictability patterns based on a model of heterogeneous beliefs. In a discrete finite time framework, some agents receive news about an asset's fundamental value through a noisy signal. The…
This article deals with ranking methods. We study the situation where a tournament between $n$ players $P_1$, $P_2$, \ldots $P_n$ gives the ranking $P_1 \succ P_2 \succ \cdots \succ P_n$, but, if the results of $P_n$ are no longer taken…
We introduce the dependent doors problem as an abstraction for situations in which one must perform a sequence of possibly dependent decisions, without receiving feedback information on the effectiveness of previously made actions.…
We explore the role that random arbitrage opportunities play in hedging financial derivatives. We extend the asymptotic pricing theory presented by Fedotov and Panayides [Stochastic arbitrage return and its implication for option pricing,…
Trusting others and reciprocating the received trust with trustworthy actions are fundaments of economic and social interactions. The trust game (TG) is widely used for studying trust and trustworthiness and entails a sequential interaction…