Decentralized interaction and co-adaptation in the repeated prisoner's dilemma

The purpose of this paper is to propose a nonparametric interest rate term structure model and investigate its implications on term structure dynamics and prices of interest rate derivative securities. The nonparametric spot interest rate process is estimated from the observed short-term interest rates following a robust estimation procedure and the market price of interest rate risk is estimated as implied from the historical term structure data. That is, instead of imposing a priori restrictions on the model, data are allowed to speak for themselves, and at the same time the model retains a parsimonious structure and the computational tractability. The model is implemented using historical Canadian interest rate term structure data. The parametric models with closed form solutions for bond and bond option prices, namely the Vasicek (1977) and CIR (1985) models, are also estimated for comparison purpose. The empirical results not only provide strong evidence that the traditional spot interest rate models and market prices of interest rate risk are severely misspecified but also suggest that different model specifications have significant impact on term structure dynamics and prices of interest rate derivative securities.

Common Knowledge and Interactive Behaviors: A Survey

This paper surveys the notion of common knowledge taken from game theory and computer science. It studies and illustrates more generally the effects of interactive knowledge in economic and social problems. First of all, common knowledge is shown to be a central concept and often a necessary condition for coordination, equilibrium achievement, agreement, and consensus. We present how common knowledge can be practically generated, for example, by particular advertisements or leadership. Secondly, we prove that common knowledge can be harmful, essentially in various cooperation and negotiation problems, and more generally when there are con icts of interest. Finally, in some asymmetric relationships, common knowledge is shown to be preferable for some players, but not for all. The ambiguous welfare effects of higher-order knowledge on interactive behaviors leads us to analyze the role of decentralized communication in order to deal with dynamic or endogenous information structures.Interactive knowledge, common knowledge, information structure, communication.

Agent-Based Computational Economics

Agent-based computational economics (ACE) is the computational study of economies modeled as evolving systems of autonomous interacting agents. Starting from initial conditions, specified by the modeler, the computational economy evolves over time as its constituent agents repeatedly interact with each other and learn from these interactions. ACE is therefore a bottom-up culture-dish approach to the study of economic systems. This study discusses the key characteristics and goals of the ACE methodology. Eight currently active research areas are highlighted for concrete illustration. Potential advantages and disadvantages of the ACE methodology are considered, along with open questions and possible directions for future research.Agent-based computational economics; Autonomous agents; Interaction networks; Learning; Evolution; Mechanism design; Computational economics; Object-oriented programming.

Agent Based Modeling of Electronic Markets To Analyze the Sustainability of Mutual Cooperation

According to game theory, dominant strategy of Prisoner’s Dilemma game is defecting. Since online trading between two strangers falls in the realm of a Prisoner’s Dilemma, failure should be the only logical conclusion of such electronic commerce situation. Traders are less likely to cooperate since they are not required to deal with the same buyer again given the enormous population of online traders. Thus one could argue that markets like eBay should never exist. Then what is the reason behind resounding success of such electronic markets? The answer lies in the reputation system that they established. Google page rankings and reader reviews on various sites like Amazon.com and Epinions.com are some other examples of the reputation system pointing towards the enormous influence that they wield in our everyday life. This research thus attempts to analyze importance of reputation system in an online trading using Agent Based Simulation. The effect of reputation system on the sustainability of mutual cooperation between online traders is analyzed by taking into account key factors like level of gullibility of online traders and the weight of influence given to their past behavior. Results indicate that reputation system is certainly capable of sustaining cooperation among online traders. However, weightage given to the past behavior of agents should be decided only after taking into account the level of gullibility of agents. Use of agent based modeling for studying dynamics of online trading is a relatively new concept. Sustaining cooperation among online traders is often perceived to be difficult task. The reputation system proposed in this research is expected to make contribution towards this goal

Methodological perspectives and research implications

"#1994"--handwritten on coverOverall statement of responsibility for the multi-volume set reads: Hayward R. Alker, Jr., Lincoln P. Bloomfield and Nazli Choucri"November 1974."Includes bibliographical referencesSupported by the Dept. of State 1722-32008

The Theory of the Firm and the Theory of the International Economic Organization: Toward Comparative Institutional Analysis

Debates regarding the competences and governance of interna- tional economic organizations such as the World Trade Organization (WTO), the European Union (EU) and the North American Free Trade Agreement (NAFFA) seem to grow more polarized. Academic lawyers, political scientists and economists seem to add little light to these heated debates. The purpose of this paper is to examine the theory of the firm and related transaction cost-based literatures of new institutional economics (NIE),4 law and economics (L&E) and industrial organizations (IO),\u27 and the application of their analytical techniques to the linked problems of competence and governance of international economic organizations (IEOs)

Correspondences and Contradictions in International and Domestic Conflict Resolution: Lessons From General Theory and Varied Contexts

Does the field of conflict resolution have any broadly applicable theories that work across the different domains of international and domestic conflict? Or, are contexts, participants, and resources so domain specific and variable that only thick descriptions of particular contexts will do? These are important questions which have been plaguing me in this depressing time for conflict resolution professionals, from September 11,2001 (9/11), to the war against Iraq. Have we learned anything about conflict resolution that really does improve our ability to describe, predict, and act to reduce unnecessary and harmful conflict? These are the questions I want to explore in this essay, all the while knowing that I will ask more questions than I have answers to. My hope is to spark more rigorous attention to the possibility of comparative dispute resolution study and practice, using key concepts, theories, empirical studies, practical wisdom, and experiential insights to spark and encourage more multi-level and multi-unit analysis of some of our shared propositions