Related papers: Money Pumps and Bounded Rationality
In many settings, money is a tool of exchange with minimal inherent utility --- agents will spend it in a way that maximizes the value of goods received subject to reasonable constraints, giving only second-order consideration to the…
As we show by using notions of equilibrium in infinite sequential games, crashes or financial escalations are rational for economic or environmental agents, who have a vision of an infinite world. This contradicts a picture of a…
A series of examples of computational models is provided, where the model aim is to interpret numerical results in terms of internal states of agents minds. Two opposite strategies or research can be distinguished in the literature. First…
In this paper we aim to find a measure for the diversity of cash flows between agents in an economy. We argue that cash flows can be linked to probabilities of finding a currency unit in a given cash flow. We then use the information…
We provide simple models for the utility function (or psychology) of an actor trading a multitude of goods for money. In this framework, money has no intrinsic consumption value, but is required as a medium of exchange. A collection of such…
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.…
Political realism aims to describe the interaction of agents involved in struggles for political power. This article formulates realism in terms of quantitative postulates that depict political power as a fluid-like substance flowing…
A fundamental economic question is that of designing revenue-maximizing mechanisms in dynamic environments. This paper considers a simple yet compelling market model to tackle this question, where forward-looking buyers arrive at the market…
Typically, merit is defined with respect to some intrinsic measure of worth. We instead consider a setting where an individual's worth is \emph{relative}: when a Decision Maker (DM) selects a set of individuals from a population to maximise…
We introduce capital games, which generalize the definition of standard games to incorporate dynamics. In capital games, payoffs are in units of capital which are not assumed to be units of utility. The dynamics allow us to infer player…
A representation of economic activity in the form of a law of conservation of value is presented based on the definition of value as potential to act in an environment. This allows the encapsulation of the term as a conserved quantity…
This note explains the equivalence between approximate rationalizability and approximate cost-rationalizability within the context of consumer demand. In connection with these results, we interpret Afriat's (1973) critical cost efficiency…
Human explanations of natural language, rationales, form a tool to assess whether models learn a label for the right reasons or rely on dataset-specific shortcuts. Sufficiency is a common metric for estimating the informativeness of…
We have previously presented a critique of the standard Marshallian theory of the firm, and developed an alternative formulation that better agreed with the results of simulation. An incorrect mathematical fact was used in our previous…
Flow control with the goal of reducing the skin friction drag on the fluid-solid interface is an active fundamental research area, motivated by its potential for significant energy savings and reduced emissions in the transport sector.…
We present a recommender system based on the Random Utility Model. Online shoppers are modeled as rational decision makers with limited information, and the recommendation task is formulated as the problem of optimally enriching the…
If the denominator of a rational function of several variables is sum of even powers and the numerator is a monomial, then we give a numerical criterion, using the exponents involved in the expression of the rational function, to decide if…
The standard rational choice model describes individuals as making choices by selecting the best option from a menu. A wealth of evidence instead suggests that individuals often filter menus into smaller sets - consideration sets - from…
The random utility model (RUM, McFadden and Richter, 1990) has been the standard tool to describe the behavior of a population of decision makers. RUM assumes that decision makers behave as if they maximize a rational preference over a…
Why is ``worthless'' fiat money generally accepted as payment for goods and services? In equilibrium theory, the value of money is generally not determined: the number of equations is one less than the number of unknowns, so only relative…