Related papers: Ergodicity-breaking reveals time optimal decision …
Ergodicity economics is a new branch of economic theory that notes the conceptual difference between time averages and expectation values, which coincide only for ergodic observables. It postulates that individual agents maximise the time…
Gambles are random variables that model possible changes in monetary wealth. Classic decision theory transforms money into utility through a utility function and defines the value of a gamble as the expectation value of utility changes.…
An important but understudied question in economics is how people choose when facing uncertainty in the timing of events. Here we study preferences over time lotteries, in which the payment amount is certain but the payment time is…
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…
I provide necessary and sufficient conditions for an agent's preferences to be represented by a unique ergodic transformation. Put differently, if an agent seeks to maximize the time average growth of their wealth, what axioms must their…
In modern portfolio theory, the balancing of expected returns on investments against uncertainties in those returns is aided by the use of utility functions. The Kelly criterion offers another approach, rooted in information theory, that…
In ergodic physical systems, time-averaged quantities converge (for large times) to their ensemble-averaged values. Large deviation theory describes rare events where these time averages differ significantly from the corresponding ensemble…
A growing body of empirical evidence suggests that the dynamics of wealth within a population tends to be non-ergodic, even after rescaling the individual wealth with the population average. Despite these discoveries, the way in which…
An agent choosing between various actions tends to take the one with the lowest cost. But this choice is arguably too rigid (not adaptive) to be useful in complex situations, e.g., where exploration-exploitation trade-off is relevant in…
Using results from neurobiology on perceptual decision making and value-based decision making, the problem of decision making between lotteries is reformulated in an abstract space where uncertain prospects are mapped to corresponding…
Selection shapes all kinds of behaviors, including how we make decisions under uncertainty. The risk attitude reflected from it should be simple, flexible, yet consistent. In this paper we engaged evolutionary dynamics to find the decision…
Risk-sensitive control balances performance with resilience to unlikely events in uncertain systems. This paper introduces ergodic-risk criteria, which capture long-term cumulative risks through probabilistic limit theorems. By ensuring the…
Consider an investor trading dynamically to maximize expected utility from terminal wealth. Our aim is to study the dependence between her risk aversion and the distribution of the optimal terminal payoff. Economic intuition suggests that…
A perfectly rational decision-maker chooses the best action with the highest utility gain from a set of possible actions. The optimality principles that describe such decision processes do not take into account the computational costs of…
In reinforcement learning, we typically aim to optimize the expected value of the sum of rewards an agent collects over a trajectory. However, if the process generating these rewards is non-ergodic, the expected value, i.e., the average…
In biology and ecology, individuals or communities of individuals living in unpredictable environments often alternate between different evolutionary strategies to spread and reduce risks. Such behavior is commonly referred to as…
In the simplest sequential decision problem for an ergodic stochastic process X, at each time n a decision u_n is made as a function of past observations X_0,...,X_{n-1}, and a loss l(u_n,X_n) is incurred. In this setting, it is known that…
We suggest employing log-ergodic processes to simulate the velocity of money in an ergodic manner. Our approach sheds light on economic behavior, policy implications, and financial dynamics by maintaining long-term stability. By bridging…
Essential to each other, growth and exploration are jointly observed in populations, be it alive such as animals and cells or inanimate such as goods and money. But their ability to move, crucial to cope with uncertainty and optimize…
Models of adaptive bet-hedging commonly adopt insights from Kelly's famous work on optimal gambling strategies and the financial value of information. In particular, such models seek evolutionary solutions that maximize long term average…