10,369 research outputs found
An overview of economic applications of David Schmeidler`s models of decision making under uncertainty
This paper surveys some economic applications of the decision theoretic framework pioneered by David Schmeidler to model effects of ambiguity. We have organized the discussion principally around three themes: financial markets, contractual arrangements and game theory. The first section discusses papers that have contributed to a better understanding of financial market outcomes based on ambiguity aversion. The second section focusses on contractual arrangements and is divided into two sub-sections. The first sub-section reports research on optimal risk sharing arrangements, while in the second sub-section, discusses research on incentive contracts. The third section concentrates on strategic interaction and reviews several papers that have extended different game theoretic solution concepts to settings with ambiguity averse players. A final section deals with several contributions which while not dealing with ambiguity per se, are linked at a formal level, in terms of the pure mathematical structures involved, with Schmeidler`s models of decision making under ambiguity. These contributions involve issues such as, inequality measurement, intertemporal decision making and multi-attribute choice.Ellsberg Paradox, Ambiguity aversion, Uncertainty aversion
An Adversarial Interpretation of Information-Theoretic Bounded Rationality
Recently, there has been a growing interest in modeling planning with
information constraints. Accordingly, an agent maximizes a regularized expected
utility known as the free energy, where the regularizer is given by the
information divergence from a prior to a posterior policy. While this approach
can be justified in various ways, including from statistical mechanics and
information theory, it is still unclear how it relates to decision-making
against adversarial environments. This connection has previously been suggested
in work relating the free energy to risk-sensitive control and to extensive
form games. Here, we show that a single-agent free energy optimization is
equivalent to a game between the agent and an imaginary adversary. The
adversary can, by paying an exponential penalty, generate costs that diminish
the decision maker's payoffs. It turns out that the optimal strategy of the
adversary consists in choosing costs so as to render the decision maker
indifferent among its choices, which is a definining property of a Nash
equilibrium, thus tightening the connection between free energy optimization
and game theory.Comment: 7 pages, 4 figures. Proceedings of AAAI-1
Homo Socionicus: a Case Study of Simulation Models of Norms
This paper describes a survey of normative agent-based social simulation models. These models are examined from the perspective of the foundations of social theory. Agent-based modelling contributes to the research program of methodological individualism. Norms are a central concept in the role theoretic concept of action in the tradition of Durkheim and Parsons. This paper investigates to what extend normative agent-based models are able to capture the role theoretic concept of norms. Three methodological core problems are identified: the question of norm transmission, normative transformation of agents and what kind of analysis the models contribute. It can be shown that initially the models appeared only to address some of these problems rather than all of them simultaneously. More recent developments, however, show progress in that direction. However, the degree of resolution of intra agent processes remains too low for a comprehensive understanding of normative behaviour regulation.Norms, Normative Agent-Based Social Simulation, Role Theory, Methodological Individualism
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