Use of a controlled experiment and computational models to measure the impact of sequential peer exposures on decision making

It is widely believed that one's peers influence product adoption behaviors. This relationship has been linked to the number of signals a decision-maker receives in a social network. But it is unclear if these same principles hold when the pattern by which it receives these signals vary and when peer influence is directed towards choices which are not optimal. To investigate that, we manipulate social signal exposure in an online controlled experiment using a game with human participants. Each participant in the game makes a decision among choices with differing utilities. We observe the following: (1) even in the presence of monetary risks and previously acquired knowledge of the choices, decision-makers tend to deviate from the obvious optimal decision when their peers make similar decision which we call the influence decision, (2) when the quantity of social signals vary over time, the forwarding probability of the influence decision and therefore being responsive to social influence does not necessarily correlate proportionally to the absolute quantity of signals. To better understand how these rules of peer influence could be used in modeling applications of real world diffusion and in networked environments, we use our behavioral findings to simulate spreading dynamics in real world case studies. We specifically try to see how cumulative influence plays out in the presence of user uncertainty and measure its outcome on rumor diffusion, which we model as an example of sub-optimal choice diffusion. Together, our simulation results indicate that sequential peer effects from the influence decision overcomes individual uncertainty to guide faster rumor diffusion over time. However, when the rate of diffusion is slow in the beginning, user uncertainty can have a substantial role compared to peer influence in deciding the adoption trajectory of a piece of questionable information

On the Causes and Consequences of Divorce

In most Western economies, the flourishing of the Welfare State has coincided with a decline of the role of the family: divorce has been introduced, and the number of marriages has decreased. We suggest that a taboo against divorce was part of the informal safety net in a period when social protection was provided by the family. Once the State started offering suitable alternatives, the taboo was no longer expedient, and was dropped. For the same reasons, marriage has become less popular. We further notice that divorce is an extremely costly process, and once allowed it may act as an independent reason for the reduction of the number of marriages. This latter result is especially evident under the assumption that agents subjectively evaluate the probability of facing a divorce using an availability heuristic.divorce, marriage, availability heuristic

Self-organising agent communities for autonomic resource management

The autonomic computing paradigm addresses the operational challenges presented by increasingly complex software systems by proposing that they be composed of many autonomous components, each responsible for the run-time reconfiguration of its own dedicated hardware and software components. Consequently, regulation of the whole software system becomes an emergent property of local adaptation and learning carried out by these autonomous system elements. Designing appropriate local adaptation policies for the components of such systems remains a major challenge. This is particularly true where the system’s scale and dynamism compromise the efficiency of a central executive and/or prevent components from pooling information to achieve a shared, accurate evidence base for their negotiations and decisions.In this paper, we investigate how a self-regulatory system response may arise spontaneously from local interactions between autonomic system elements tasked with adaptively consuming/providing computational resources or services when the demand for such resources is continually changing. We demonstrate that system performance is not maximised when all system components are able to freely share information with one another. Rather, maximum efficiency is achieved when individual components have only limited knowledge of their peers. Under these conditions, the system self-organises into appropriate community structures. By maintaining information flow at the level of communities, the system is able to remain stable enough to efficiently satisfy service demand in resource-limited environments, and thus minimise any unnecessary reconfiguration whilst remaining sufficiently adaptive to be able to reconfigure when service demand changes

Custom Made Versus Ready to Wear Treatments; Behavioral Propensities in Physician's Choices

To customize treatments to individual patients entails costs of coordination and cognition. Thus, providers sometimes choose treatments based on norms for broad classes of patients. We develop behavioral hypotheses explaining when and why doctors customize to the particular patient, and when instead they employ "ready-to-wear" treatments. Our empirical studies examining length of office visits and physician prescribing behavior find evidence of norm-following behavior. Some such behavior, from our studies and from the literature, proves sensible; but other behavior seems far from optimal.

Cross-border Risk Transmission by a Multinational Bank

A model of international banking, with the stress on the specific management human capital (borrower monitoring) and the majority shareholder human capital (manager auditing) is used to study the effects of exogenous shocks in one country on credit creation in the other. I show that the presence of the two named categories of non-transferable skills in the banking technology reduces the role of the standard portfolio diversification motive for cross-border transmission of disturbances. At the same time, this bank-specific market friction creates a separate channel of shock propagation, a function of the bank shareholder and manager incentives. It can even happen that the exogenous shock impact on credit has a different sign in the “relationship“ as opposed to “arm’s length“ banking environment. This phenomenon, caused by the marginal effect of the manager human capital involvement in the bank operation, is present in the bank branches with relatively small loan volumes. When the loan volume is large, the direction of the manager-auditing bank reaction to shocks abroad is the same as that of an arm’s length lender.multinational bank; managerial effort; audit; credit; foreign shock

Circuit theory of finance and the role of incentives in financial sector reform

The author analyzes the financial system's role in economic growth and stability, addressing several core policy issues associated with financial sector reform in emerging economies. He studies finance's role in the context of a circuit model, with interacting rational, forward-looking, heterogeneous agents. He shows finance to essentially complement the price system in coordinating decentralized intertemporal resource allocation choices made by agents operating with limited information and incomplete trust. He discusses the links between finance and incentives for efficiency and stability in the context of the circuit model. He also identifies incentives and incentive-compatible institutions for reform strategies for financial sectors in emerging economies. Among his conclusions: 1) Circuit theory features important methodological advantages to analyze the role of finance, and to assess structural weaknesses of financial systems under different institutional settings and in different stages of economic development. 2) Incentives for prudence and honesty can protect the stability of the circuit by directing private sector forces unleashed by liberalization. In particular: a) Financial institutions should be encouraged to invest in reputational capital. b) Governments should complement the creation of franchise value by strengthening supervision and by adopting a regulatory regime based on rules designed to align the private incentives of market players with the social goal of financial stability. c) Safety nets to reduce systemic risk should minimize the moral hazard from stakeholders by limiting risk protection and by making the cost of protection sensitive to the risk taken. d) Governments should encourage self-policing in the financial sector. e) Where information and trust are scarce, there is a potential market for them, and governments can greatly improve incentives for optimal provision of information. f) Governments should strengthen the complementarity between the formal and the informal financial sectors. Emphasizing incentives is not to deny the importance of good rules, capable regulators andsupervisors, and strong enforcement measures. It is to suggest that the returns on investments to set up rules, institutions, and enforcement mechanisms can be greater if market players have an incentive to align their own objectives with the social goal of financial stability.Banks&Banking Reform,Economic Theory&Research,Payment Systems&Infrastructure,Environmental Economics&Policies,Financial Intermediation,Economic Theory&Research,Environmental Economics&Policies,Banks&Banking Reform,Financial Intermediation,International Terrorism&Counterterrorism

Market Manipulation and a Case for the Further Regulation of Social Media and the Finance Industry

This paper intends to investigate the potential of market manipulation in under regulated markets that does not exist in regulated ones. I do this by looking at the previous literature discovered on ambiguity aversion, and how it is linked to the increase of social media’s effect on price changes in markets. I investigate two different markets that are regulated and unregulated. These markets are the US stock exchange and the cryptocurrency market. I then see what the effect that twitter has on the two over the same periods of time using the most up-to-date models. Finally, I recommend policy changes that will help prevent market manipulation of under regulated markets