Related papers: Bounded Rationality and Animal Spirits: A Fluctuat…
Economic theory implies strong limitations on what types of consumption behavior are considered rational. Rationality implies that the Slutsky matrix, which captures the substitution effects of compensated price changes on demand for…
Slutsky symmetry and negative semidefiniteness are necessary and sufficient conditions for the rationality of demand functions. While the empirical implications of Slutsky negative semidefiniteness in repeated cross-sectional demand data…
Standard economic theory assumes that agents in markets behave rationally. However, the observation of extremely large fluctuations in the price of financial assets that are not correlated to changes in their fundamental value, as well as…
An important goal of empirical demand analysis is choice and welfare prediction on counterfactual budget sets arising from potential policy-interventions. Such predictions are more credible when made without arbitrary…
The response of thermodynamic systems perturbed out of an equilibrium steady-state is described by the reciprocal and the fluctuation-dissipation relations. The so-called fluctuation theorems extended the study of fluctuations far beyond…
Decision-making individuals often imitate their highest-earning fellows rather than optimize their own utilities, due to bounded rationality and incomplete information. Perpetual fluctuations between decisions have been reported as the…
The development of stochastic thermodynamics during the last decades prompted the discovery of novel nonequilibrium relations refining our understanding of the second law in small fluctuating systems and its connection with information…
In this paper we investigate a model of consensus decision making [Hartnett A. T., et al., Phys. Rev. Lett., 2016, 116, 038701] following a statistical physics approach presented in [Sarkanych P., et al., Phys. Biol., 2023, 20, 045005].…
By specifying behaviour across multiple agents, social norms are a coordination approach to resolving social dilemmas. Decentralized and wide adoption can be achieved by norms whose prescription involves interpreting stochastic signals in…
Understanding how systems respond to external perturbations is a fundamental challenge in physics, particularly for non-equilibrium and non-stationary processes. The fluctuation-dissipation theorem provides a complete framework for…
Game theoretic equilibria are mathematical expressions of rationality. Rational agents are used to model not only humans and their software representatives, but also organisms, populations, species and genes, interacting with each other and…
This paper develops a comprehensive theoretical framework that imports concepts from stochastic thermodynamics to model price impact and characterize the feasibility of round-trip arbitrage in financial markets. A trading cycle is treated…
We investigate thermodynamics of general nonequilibrium processes stopped at stochastic times. We propose a systematic strategy for constructing fluctuation-theorem-like martingales for each thermodynamic functional, yielding a family of…
To study the assumption that the utility maximization hypothesis implicitly adds to consumer theory, we consider a mathematical representation of pre-marginal revolution consumer theory based on subjective exchange ratios. We introduce two…
In this paper we re-examine the traditional problem of connecting the internal fluctuations of a system to its response to external forcings and extend the classical theory in order to be able to encompass also nonlinear processes. With…
Nontransitive choices have long been an area of curiosity within economics. However, determining whether nontransitive choices represent an individual's preference is a difficult task since choice data is inherently stochastic. This paper…
We propose a simple statistical-physics-inspired model for the effect of intrinsic fluctuations on supply and demand in markets. The model consists of agents that trade in two types of goods of which the total number is separately…
Predicting how systems respond to external perturbations far from equilibrium remains a fundamental challenge across physics, chemistry, and biology. We present a unified response framework for stochastic Markov dynamics that integrates…
We consider the asymptotic behaviour of the fluctuation process for large stochastic systems of interacting particles driven by both idiosyncratic and common noise with an interaction kernel \(k \in L^2(\R^d) \cap L^\infty(\R^d)\). Our…
We introduce a stochastic heterogeneous interacting-agent model for the short-time non-equilibrium evolution of excess demand and price in a stylized asset market. We consider a combination of social interaction within peer groups and…