Related papers: Money Pumps and Bounded Rationality
This note provides a critical discussion of the \textit{Critical Cost-Efficiency Index} (CCEI) as used to assess deviations from utility-maximizing behavior. I argue that the CCEI is hard to interpret, and that it can disagree with other…
Human behavioural patterns exhibit selfish or competitive, as well as selfless or altruistic tendencies, both of which have demonstrable effects on human social and economic activity. In behavioural economics, such effects have…
Escalation is the fact that in a game (for instance an auction), the agents play forever. It is not necessary to consider complex examples to establish its rationality. In particular, the $0,1$-game is an extremely simple infinite game in…
Despite all our great advances in science, technology and financial innovations, many societies today are struggling with a financial, economic and public spending crisis, over-regulation, and mass unemployment, as well as lack of…
Optimization is offered as an objective approach to resolving complex, real-world decisions involving uncertainty and conflicting interests. It drives business strategies as well as public policies and, increasingly, lies at the heart of…
The sum-utility maximization problem is known to be important in the energy systems literature. The conventional assumption to address this problem is that the utility is concave. But for some key applications, such an assumption is not…
Human decision-making in real-life deviates significantly from the optimal decisions made by fully rational agents, primarily due to computational limitations or psychological biases. While existing studies in behavioral finance have…
A group of experts, for instance climate scientists, is to choose among two policies $f$ and $g$. Consider the following decision rule. If all experts agree that the expected utility of $f$ is higher than the expected utility of $g$, the…
The resource calculus is an extension of the lambda-calculus allowing to model resource consumption. It is intrinsically non-deterministic and has two general notions of reduction - one parallel, preserving all the possible results as a…
We study the problem of maximising terminal utility for an agent facing model uncertainty, in a frictionless discrete-time market with one safe asset and finitely many risky assets. We show that an optimal investment strategy exists if the…
There is increasing interest in using LLMs as decision-making "agents." Doing so includes many degrees of freedom: which model should be used; how should it be prompted; should it be asked to introspect, conduct chain-of-thought reasoning,…
A dynamic model of collective consumption and saving decisions made by a finite number of agents with constant but different discount rates is developed. Collective utility is a weighted sum of individual utilities with time-varying utility…
Neural rationale models are popular for interpretable predictions of NLP tasks. In these, a selector extracts segments of the input text, called rationales, and passes these segments to a classifier for prediction. Since the rationale is…
Budget aggregation is a process in which citizens vote by declaring their individual ideal budget allocation, and a pre-determined rule aggregates all votes into a single outcome. Recent theoretical work has proposed various aggregation…
Entropy serves as a central observable which indicates uncertainty in many chemical, thermodynamical, biological and ecological systems, and the principle of the maximum entropy (MaxEnt) is widely supported in natural science. Recently,…
The investor is interested in the expected return and he is also concerned about the risk and the uncertainty assumed by the investment. One of the most popular concepts used to measure the risk and the uncertainty is the variance and/or…
We implement nonparametric revealed-preference tests of subjective expected utility theory and its generalizations. We find that a majority of subjects' choices are consistent with the maximization of some utility function. They respond to…
Dependence on the parameter is continuous when perturbations of the parameter preserves strict preference for one alternative over another. We characterise this property via a utility function over alternatives that depends continuously on…
We present a rational analysis of curiosity, proposing that people's curiosity is driven by seeking stimuli that maximize their ability to make appropriate responses in the future. This perspective offers a way to unify previous theories of…
This work investigates a modified Schelling model within the scope and aims of Social Physics. The main purpose is to see if how the concepts of potential and kinetic energy can be represented within a computational sociological system. A…