Related papers: The value of partial information
It has been shown that one can accommodate data (Bayes) and constraints (MaxEnt) in one method, the method of Maximum (relative) Entropy (ME) (Giffin 2007). In this paper we show a complex agent based example of inference with two different…
One of the central issues in the debate on network neutrality has been whether one should allow or prevent preferential treatment by an internet service provider (ISP) of traffic according to its origin. This raised the question of whether…
How do consultants price expertise? This paper studies a problem of selling information products (expertise) to a buyer (client) who faces decision-making problem under uncertainty. The client is privately informed about the type of…
We consider the jump-diffusion risky asset model and study its conditional prediction laws. Next, we explain the conditional least square hedging strategy and calculate its closed form for the jump-diffusion model, considering the…
We study arbitrage opportunities, market viability and utility maximization in market models with an insider. Assuming that an economic agent possesses from the beginning an additional information in the form of a random variable G, which…
This paper presents a simple agent-based model of an economic system, populated by agents playing different games according to their different view about social cohesion and tax payment. After a first set of simulations, correctly…
We consider decision-making under incomplete information about an unknown state of nature. We show that a decision problem yields a higher value of information than another, uniformly across information structures, if and only if it is…
The determination of acceptability prices of contingent claims requires the choice of a stochastic model for the underlying asset price dynamics. Given this model, optimal bid and ask prices can be found by stochastic optimization. However,…
This paper will examine a model with many agents, each of whom has a different belief about the dynamics of a risky asset. The agents are Bayesian and so learn about the asset over time. All agents are assumed to have a finite (but random)…
We consider a routing game among non-atomic agents where link latency functions are conditional on an uncertain state of the network. The agents have the same prior belief about the state, but only a fixed fraction receive private route…
Mandatory emission trading schemes are being established around the world. Participants of such market schemes are always exposed to risks. This leads to the creation of an accompanying market for emission-linked derivatives. To evaluate…
We characterize information as risk reduction between knowledge states represented by partitions of the underlying probability space. Entropy corresponds to risk reduction from no (or partial) knowledge to full knowledge about a random…
We present a simple agent-based model to study the development of a bubble and the consequential crash and investigate how their proximate triggering factor might relate to their fundamental mechanism, and vice versa. Our agents invest…
In this paper, we consider one aspect of the problem of applying decision theory to the design of agents that learn how to make decisions under uncertainty. This aspect concerns how an agent can estimate probabilities for the possible…
We consider the mean-variance hedging problem under partial Information. The underlying asset price process follows a continuous semimartingale and strategies have to be constructed when only part of the information in the market is…
The influence of a fixed number of agents with the same fixed behavior on the dynamics of the minority game is studied. Alternatively, the system studied can be considered the minority game with a change in the comfort threshold away from…
Different models to study the wealth distribution in an artificial society have considered a transactional dynamics as the driving force. Those models include a risk aversion factor, but also a finite probability of favoring the poorer…
We consider a structural model where the survival/default state is observed together with a noisy version of the firm value process. This assumption makes the model more realistic than most of the existing alternatives, but triggers…
We analyze different ways of pairing agents in a bipartite matching problem, with regard to its scaling properties and to the distribution of individual ``satisfactions''. Then we explore the role of partial information and bounded…
We introduce the problem of assigning resources to improve their utilization. The motivation comes from settings where agents have uncertainty about their own values for using a resource, and where it is in the interest of a group that…