Related papers: Money Pumps and Bounded Rationality
The principle of optimality is a fundamental aspect of dynamic programming, which states that the optimal solution to a dynamic optimization problem can be found by combining the optimal solutions to its sub-problems. While this principle…
The auction theory literature has so far focused mostly on the design of mechanisms that takes the revenue or the efficiency as a yardstick. However, scenarios where the {\it capacity}, which we define as \textit{``the number of bidders the…
We study cautious reasoning in finite sequential games played by agents with perfect recall. Our contribution lies in formulating a definition of prudent rationalizability (Heifetz et al. 2021, BEJTE) as an iterative reduction procedure of…
We study the dual formulation of the utility maximization problem in incomplete markets when the utility function is finitely valued on the whole real line. We extend the existing results in this literature in two directions. First, we…
The determinants of the velocity of money have been examined based on life-cycle hypothesis. The velocity of money can be expressed by reciprocal of the average value of holding time which is defined as interval between participating…
I offer an analysis of the Principle of Sufficient Reason and its relevancy for the scientific endeavour. I submit that the world is not, and cannot be, rational - only some brained beings are. The Principle of Sufficient Reason is not a…
Bounded rationality in mechanism design aims to ensure incentive-compatibility for agents who are cognitively limited. These agents lack the contingent reasoning skills that traditional mechanism design assumes, and depending on how these…
A minimal central bank credibility, with a non-zero probability of not renegning his commitment ("quasi-commitment"), is a necessary condition for anchoring inflation expectations and stabilizing inflation dynamics. By contrast, a complete…
Most demand management approaches with non-mandatory policies assume full users' cooperation, which may not be the case given users' beliefs, needs and preferences. In this paper we propose a mechanism for demand management including…
The disbalance of Supply and Demand is typically considered as the driving force of the markets. However, the measurement or estimation of Supply and Demand at price different from the execution price is not possible even after the…
The ability to measure the satisfaction of (groups of) voters is a crucial prerequisite for formulating proportionality axioms in approval-based participatory budgeting elections. Two common - but very different - ways to measure the…
How does one allocate a collection of resources to a set of strategic agents in a fair and efficient manner without using money? For in many scenarios it is not feasible to use money to compensate agents for otherwise unsatisfactory…
Bounded rationality, that is, decision-making and planning under resource limitations, is widely regarded as an important open problem in artificial intelligence, reinforcement learning, computational neuroscience and economics. This paper…
Entropy is a very useful concept from physics that tries to explain how a system behaves from a point of view of the thermodynamics. However, there are two ways to explain entropy, and it depends on if we are studying a microsystem or a…
The economic life of an asset is the optimum length of its usefulness, which is the moment that the asset's expenses are minimum. In this paper, the economic life of physical assets, such as industry machine and equipment, can be…
The aim of the present paper is to provide criteria for a central bank of how to choose among different monetary-policy rules when caring about a number of policy targets such as the output gap and expected inflation. Special attention is…
We present an optimal investment theorem for a currency exchange model with random and possibly discontinuous proportional transaction costs. The investor's preferences are represented by a multivariate utility function, allowing for…
Recent years have seen a boom in interest in machine learning systems that can provide a human-understandable rationale for their predictions or decisions. However, exactly what kinds of explanation are truly human-interpretable remains…
Here we introduce the idea of using rational expectations, a core concept in economics and finance, as a tool to predict the optimal failure time for a wide class of weighted k-out-of-n reliability systems. We illustrate the concept by…
Many learning algorithms are known to converge to an equilibrium for specific classes of games if the same learning algorithm is adopted by all agents. However, when the agents are self-interested, a natural question is whether agents have…