Related papers: Arbitrage from a Bayesian's Perspective
We propose a model of inference and heuristic decision-making in groups that is rooted in the Bayes rule but avoids the complexities of rational inference in partially observed environments with incomplete information, which are…
We explore Bayesian reasoning as a means to quantify uncertainty in neural networks for question answering. Starting with a multilayer perceptron on the Iris dataset, we show how posterior inference conveys confidence in predictions. We…
The dominant theories of rational choice assume logical omniscience. That is, they assume that when facing a decision problem, an agent can perform all relevant computations and determine the truth value of all relevant logical/mathematical…
We introduce a solution concept for extensive-form games of incomplete information in which players need not assign likelihoods to what they do not know about the game. This is embedded in a model in which players can hold multiple priors.…
This paper investigates the equilibrium portfolio selection for smooth ambiguity preferences in a continuous-time market. The investor is uncertain about the risky asset's drift term and updates the subjective belief according to the…
Markets increasingly accommodate large language models (LLMs) as autonomous decision-making agents. As this transition occurs, it becomes critical to evaluate how these agents behave relative to their human and task-specific statistical…
Persuasion, defined as the act of exploiting an informational advantage in order to effect the decisions of others, is ubiquitous. Indeed, persuasive communication has been estimated to account for almost a third of all economic activity in…
The idea of this paper is an advanced game concept. This concept is expected to model non-monetary bilateral cooperations between self-interested agents. Such non-monetary cases are social cooperations like allocation of high level jobs or…
A Bayesian game is said to have nested information if the players are ordered, and each player knows the types of all players that follow her in that order. We prove that all multiplayer Bayesian games with finite actions spaces, bounded…
We study how a decision-maker can acquire more information from an agent by reducing her own ability to observe what the agent transmits. In a large class of binary-action games, opacity design is just as good as full commitment to actions…
Complex learning agents are increasingly deployed alongside existing experts, such as human operators or previously trained agents. However, it remains unclear how should learners optimally incorporate certain forms of expert data, which…
This paper studies an equity market of stochastic dimension, where the number of assets fluctuates over time. In such a market, we develop the fundamental theorem of asset pricing, which provides the equivalence of the following statements:…
We study an all-pay contest in which players with low abilities are filtered out before competing for prizes. We consider a setting where the designer admits a certain number of top players. The admitted players update their beliefs based…
Obtaining more accurate equity value estimates is the starting point for stock selection, value-based indexing in a noisy market, and beating benchmark indices through tactical style rotation. Unfortunately, discounted cash flow, method of…
In repeated interactions between individuals, we do not expect that exactly the same situation will occur from one time to another. Contrary to what is common in models of repeated games in the literature, most real situations may differ a…
We model a competitive market where AI agents buy answers from upstream generative models and resell them to users who differ in how much they value accuracy and in how much they fear hallucinations. Agents can privately exert effort for…
\begin{abstract} In this paper, we integrated the statistical arbitrage strategy, pairs trading, into the Black-Litterman model and constructed efficient mean-variance portfolios. Typically, pairs trading underperforms under volatile or…
We study the bounds of mediated communication in sender-receiver games in which the sender's payoff is state-independent. We show that the feasible distributions over the receiver's beliefs under mediation are those that induce zero…
Bayesian games model interactive decision-making where players have incomplete information -- e.g., regarding payoffs and private data on players' strategies and preferences -- and must actively reason and update their belief models (with…
We outline how to create a mechanism that provides an optimal way to elicit, from an arbitrary group of experts, the probability of the truth of an arbitrary logical proposition together with collective information that has an explicit form…