Quantum decision making by social agents

The influence of additional information on the decision making of agents, who are interacting members of a society, is analyzed within the mathematical framework based on the use of quantum probabilities. The introduction of social interactions, which influence the decisions of individual agents, leads to a generalization of the quantum decision theory developed earlier by the authors for separate individuals. The generalized approach is free of the standard paradoxes of classical decision theory. This approach also explains the error-attenuation effects observed for the paradoxes occurring when decision makers, who are members of a society, consult with each other, increasing in this way the available mutual information. A precise correspondence between quantum decision theory and classical utility theory is formulated via the introduction of an intermediate probabilistic version of utility theory of a novel form, which obeys the requirement that zero-utility prospects should have zero probability weights.Comment: This paper has been withdrawn by the authors because a much extended and improved version has been submitted as arXiv:1510.02686 under the new title "Role of information in decision making of social agents

Collective Decision Dynamics in the Presence of External Drivers

We develop a sequence of models describing information transmission and decision dynamics for a network of individual agents subject to multiple sources of influence. Our general framework is set in the context of an impending natural disaster, where individuals, represented by nodes on the network, must decide whether or not to evacuate. Sources of influence include a one-to-many externally driven global broadcast as well as pairwise interactions, across links in the network, in which agents transmit either continuous opinions or binary actions. We consider both uniform and variable threshold rules on the individual opinion as baseline models for decision-making. Our results indicate that 1) social networks lead to clustering and cohesive action among individuals, 2) binary information introduces high temporal variability and stagnation, and 3) information transmission over the network can either facilitate or hinder action adoption, depending on the influence of the global broadcast relative to the social network. Our framework highlights the essential role of local interactions between agents in predicting collective behavior of the population as a whole.Comment: 14 pages, 7 figure

Going beyond perfect rationality: drought risk, economic choices and the influence of social networks

Theoretical and experimental studies from psychological and behavioral sciences show that heuristics and social networks play an important role in decision-making under risk. The goal of this paper is to investigate the effects of empirical social networks and different behavioral rules on farmers’ irrigation adoption under drought risk and its impacts on several macroeconomic indicators such as the rate of adaptation, water demand and regional agricultural income. We present an application of a spatial economic ABM which is able to simulate the effect of droughts on crop production, farm income and farm decision-making. The agents’ population is parameterized using survey data, including data on social networks. Four experiments are conducted combining two climate scenarios with two behavioral scenarios (maximizers vs. heuristic-based agents). The results show that the adoption process follows a different path in the scenario with heuristic-based farmers. The adoption of irrigation is slower in the short run due to reliance on information from social networks and farmers’ uncertainty regarding drought events. This results in agricultural income loss and a lower water demand in the short run compared to the scenario with maximizing agent

The role of social interaction in farmers' climate adaptation choice

Adaptation to climate change might not always occur, with potentially\ud catastrophic results. Success depends on coordinated actions at both\ud governmental and individual levels (public and private adaptation). Even for a “wet” country like the Netherlands, climate change projections show that the frequency and severity of droughts are likely to increase. Freshwater is an important factor for agricultural production. A deficit causes damage to crop production and consequently to a loss of income. Adaptation is the key to decrease farmers’ vulnerability at the micro level and the sector’s vulnerability at the macro level. Individual adaptation decision-making is determined by the behavior of economic agents and social interaction among them. This can be best studied with agentbased modelling. Given the uncertainty about future weather conditions and the costs and effectiveness of adaptation strategies, a farmer in the model uses a cognitive process (or heuristic) to make adaptation decisions. In this process, he can rely on his experiences and on information from interactions within his social network. Interaction leads to the spread of information and knowledge that causes learning. Learning changes the conditions for individual adaptation decisionmaking. All these interactions cause emergent phenomena: the diffusion of adaptation strategies and a change of drought vulnerability of the agricultural sector. In this paper, we present a conceptual model and the first implementation of an agent-based model. The aim is to study the role of interaction in a farmer’s social network on adaptation decisions and on the diffusion of adaptation strategies\ud and vulnerability of the agricultural sector. Micro-level survey data will be used to parameterize agents’ behavioral and interaction rules at a later stage. This knowledge is necessary for the successful design of public adaptation strategies, since governmental adaptation actions need to be fine-tuned to private adaptation behavior

Using Information Markets to Improve Public Decision Making

Information markets are markets for contracts that yield payments based on the outcome of an uncertain future event, such as a presidential election. The prices in these markets provide useful information about a particular issue, such as a president's reelection probability. The purpose of this paper is to suggest how the use of information markets can improve the quality of public policy. Our central contribution is to propose an efficient way to implement well-informed policy decisions. We do this by linking and building upon the literatures on information markets and mechanism design. Our claim is that the prices in information markets can inform the mechanism design process, thereby making previously infeasible mechanisms feasible for the policy maker. Specifically, information markets make pay-for-performance contracts viable in the policy domain. Although we focus on public sector decision making, the analysis is sufficiently general to apply to a wide range of problems in private sector and not-for-profit decision making. The framework can be applied to any situation in which a decision maker has the resources, but not the necessary information and ability, to achieve his specified objective. First, we show how it is generally possible to design contracts based on different contingencies whose prices will convey useful information on the costs and benefits of a number of policy choices, ranging from regulation to public works projects. Second, we describe one way of providing incentives for self-interested agents to implement policies that maximize net social benefits. Third, we show how information markets can be used to provide a stronger foundation for implementing a variety of government oversight mechanisms, such as a regulatory budget. We also show how legislators can use traditional budgetary controls in conjunction with information markets to exercise more effective oversight. Finally, we identify and analyze the strengths and limitations of using information markets to help improve policy. To make the analysis concrete, we examine how the "Copenhagen Consensus" which makes recommendations on spending $50 billion wisely, could have benefited from applying information markets. We argue that there is a large scope for expanding the use of information markets. These markets could promote greater transparency in governmental decision making, provide more accurate estimates of the efficiency and distributional impacts of different policies, provide a better understanding of uncertainties, help with sensitivity analysis, offer a low-cost way of assessing new policy proposals, finance government projects and regulations with positive net benefits, allow those affected by specific policies the opportunity to hedge risk, and aid in the design of policies. Furthermore, information markets can help assess the value of additional research on the decision to undertake a project. At the same time, we suggest that there are important limits to the application of information markets. We also suggest how government could play an important role in the expansion of information markets and researchers could help in the development and assessment of these markets.

An Economic Approach to the Self : the Dual Agent

This paper extends the notion of the rational agent in economics by acknowledging the role of the unconscious in the agents decision-making process. It argues that the unconscious can be modelled by a rational agent with his own objective function and set of information. The combination of both the conscious and unconscious agents is called the "dual agent". This dual agent presents rationally biased behaviors that may not disappear through aggregation, and could be potentially measured. It also provides a theoretical approach to the emotionally-driven actions. On the social sciences side, the paper pleads for a wider use of substantive rationality in the understanding of human behavior.rational agent; decision-making; conscious; unconscious; asymmetry of information; imperfect information; dual agent; theory of emotion; substantive and procedural rationality; psychology; bias

Chinese international students in Australia: an insight into their help and information seeking manners

Understanding the waysthatinternational students seek information and help in the host country is essential forimprovingacademic, social, cultural,and welfare support for this student cohort. However,there is a dearth of literature that documentshowinternational studentsin the vocational education and training (VET) sector do so. This paper aims to fill thisgap. Based on in-depth interviews with 30 Chinese international students undertaking diploma and associate degree programsin Australia,this research shows thatthe ways in which Chinese international students seek help prior to their departure and after their arrival at the host country, largely dependson the nature of the issuesthey confront. The data also reveals that students’use of education agents is not limited to the pre-departure stage,asisindicated in theexisting literature, but throughout their journey in the host country. Notably,the role of agents has become increasingly important in Chinese international students’ decision-making processesduring their transition from diploma to associate degree and higher education programs

Acceptable Risk in a Portfolio Analysis

A social network has been used to simulate how agents of different levels of risk aversion under different circumstances behave in financial markets when deciding between risk-free and a risky asset. This is done by a discrete time version evolutionary game of risk-loving and risk-averse agents. The evolutionary process takes place on a social network through which investors acquire information they need to choose the strategy. A significant feature of the paper is that first-order stochastic dominance is a key determinant of the decision-making, while second-order stochastic dominance is not, with the level of omniscience and preferences of agents also having a significant role. Under most of the circumstances, pure risk-aversion turns out to be dominated strategy, while pure risk-taking “almost” dominant