Related papers: Arbitrage from a Bayesian's Perspective
We consider a sequential decision-making setting where, at every round $t$, a market maker posts a bid price $B_t$ and an ask price $A_t$ to an incoming trader (the taker) with a private valuation for one unit of some asset. If the trader's…
We study a setting where Bayesian agents with a common prior have private information related to an event's outcome and sequentially make public announcements relating to their information. Our main result shows that when agents' private…
Bayesian inference has theoretical attractions as a principled framework for reasoning about beliefs. However, the motivations of Bayesian inference which claim it to be the only 'rational' kind of reasoning do not apply in practice. They…
We consider a financial market in which traders potentially face restrictions in trading some of the available securities. Traders are heterogeneous with respect to their beliefs and risk profiles, and the market is assumed thin: traders…
In this paper, we study axiomatic foundations of Bayesian persuasion, where a principal (i.e., sender) delegates the task of choice making after informing a biased agent (i.e., receiver) about the payoff relevant uncertain state (see, e.g.,…
We introduce and study the problem of detecting whether an agent is updating their prior beliefs given new evidence in an optimal way that is Bayesian, or whether they are biased towards their own prior. In our model, biased agents form…
Although both data availability and the demand for accurate forecasts are increasing, collaboration between stakeholders is often constrained by data ownership and competitive interests. In contrast to recent proposals within cooperative…
We propose a learning dynamics to model how strategic agents repeatedly play a continuous game while relying on an information platform to learn an unknown payoff-relevant parameter. In each time step, the platform updates a belief estimate…
We present a methodology for representing probabilistic relationships in a general-equilibrium economic model. Specifically, we define a precise mapping from a Bayesian network with binary nodes to a market price system where consumers and…
A public decision-making problem consists of a set of issues, each with multiple possible alternatives, and a set of competing agents, each with a preferred alternative for each issue. We study adaptations of market economies to this…
"Fundamental theorem of asset pricing" roughly states that absence of arbitrage opportunity in a market is equivalent to the existence of a risk-neutral probability. We give a simple counterexample to this oversimplified statement. Prices…
Prediction markets mobilize financial incentives to forecast binary event outcomes through the aggregation of dispersed beliefs and heterogeneous information. Their growing popularity and demonstrated predictive accuracy in political…
In many natural settings agents participate in multiple different auctions that are not simultaneous. In such auctions, future opportunities affect strategic considerations of the players. The goal of this paper is to develop a quantitative…
We consider finite-horizon and infinite-horizon versions of a dynamic game with $N$ selfish players who observe their types privately and take actions that are publicly observed. Players' types evolve as conditionally independent Markov…
Bayesian observer and actor models have provided normative explanations for many behavioral phenomena in perception, sensorimotor control, and other areas of cognitive science and neuroscience. They attribute behavioral variability and…
We study the computations that Bayesian agents undertake when exchanging opinions over a network. The agents act repeatedly on their private information and take myopic actions that maximize their expected utility according to a fully…
Online auctions are one of the most fundamental facets of the modern economy and power an industry generating hundreds of billions of dollars a year in revenue. Auction theory has historically focused on the question of designing the best…
We study overpricing in a repeated game between two representative agents: a market maker, who controls market liquidity, and a market taker, who chooses trade quantities. Market prices evolve through the endogenous price impact of trades…
When subjected to automated decision-making, decision subjects may strategically modify their observable features in ways they believe will maximize their chances of receiving a favorable decision. In many practical situations, the…
Polymarket is a prediction market platform where users can speculate on future events by trading shares tied to specific outcomes, known as conditions. Each market is associated with a set of one or more such conditions. To ensure proper…