An Economic Theory of Self-Control

Although many economists, most notably Strotz, have discussed dynamic inconsistency and precommitment, none have dealt directly with the essence of the problem: self-control. This paper attempts to fill that gap by modeling man as an organization. The Strotz model is recast to include the control features missing in his formulation. The organizational analogy permits us to draw on the theory of agency. We thus relate the individual's control problems with those that exist in agency relationships.

Explaining investor preference for cash dividends.

The well-known tendency of investors to favor cash dividends emerges quite naturally in two new theories of choice behavior [the theory of self-control due t

Tool Support for Collaborative Software Prototyping

Prototyping is a means by which requirements for software projects can be defined and refined before they are committed to firm specifications for the finished software product. By this process, costly and time-consuming errors in specification can be avoided or minimized. Reconfiguration is the concept of altering the program code, bindings between program modules, or logical or physical distribution of software components while allowing the continuing execution of the software being changed. Combining these two notions suggests the potential for a development environment where requirements can be quickly and dynamically evolved. This paper discusses reconfiguration-based prototyping (RBP), that is, the simultaneous consideration of requirements, software behavior and user feedback within a running system in order to derive a clear specification of an intended product. Tools enabling RBP can coordinate the efforts of developers, users and subject matter specialists alike as they work towards consensus on an application's specification by means of a prototype. The authors describe the scope of the modifications that can be effected by an integration of prototyping and reconfiguration protocols, and they then demonstrate that the technology exists to create such an environment. They conclude by describing a software development environment based on RBP. (Also cross-referenced as UMIACS-TR-95-5

Belief heterogeneity and survival in incomplete markets

In complete markets economies (Sandroni [16]), or in economies with Pareto optimal outcomes (Blume and Easley [10]), the market selection hypothesis holds, as long as traders have identical discount factors. Traders who survive must have beliefs that merge with the truth. We show that in incomplete markets, regardless of traders’ discount factors, the market selects for a range of beliefs, at least some of which do not merge with the truth. We also show that impatient traders with incorrect beliefs can survive and that these incorrect beliefs impact prices. These beliefs may be chosen so that they are far from the truth

Communications Biophysics

Contains reports on five research projects

Why have asset price properties changed so little in 200 years

We first review empirical evidence that asset prices have had episodes of large fluctuations and been inefficient for at least 200 years. We briefly review recent theoretical results as well as the neurological basis of trend following and finally argue that these asset price properties can be attributed to two fundamental mechanisms that have not changed for many centuries: an innate preference for trend following and the collective tendency to exploit as much as possible detectable price arbitrage, which leads to destabilizing feedback loops.Comment: 16 pages, 4 figure