Complexity and Bounded Rationality in Individual Decision Problems

I develop a model of endogenous bounded rationality due to search costs, arising implicitly from the decision problem's complexity. The decision maker is not required to know the entire structure of the problem when making choices. She can think ahead, through costly search, to reveal more of its details. However, the costs of search are not assumed exogenously; they are inferred from revealed preferences through choices. Thus, bounded rationality and its extent emerge endogenously: as problems become simpler or as the benefits of deeper search become larger relative to its costs, the choices more closely resemble those of a rational agent. For a fixed decision problem, the costs of search will vary across agents. For a given decision maker, they will vary across problems. The model explains, therefore, why the disparity, between observed choices and those prescribed under rationality, varies across agents and problems. It also suggests, under reasonable assumptions, an identifying prediction: a relation between the benefits of deeper search and the depth of the search. In decision problems with structure that allows the optimal foresight of search to be revealed from choices of plans of action, the relation can be tested on any agent-problem pair, rendering the model falsifiable. Moreover, the relation can be estimated allowing the model to make predictions with respect to how, in a given problem, changes in the terminal payoffs affect the depth of search and, consequently, choices. My approach provides a common framework for depicting the underlying limitations that force departures from rationality in different and unrelated decision-making situations. I show that it is consistent with violations of timing-independence in temporal framing problems, dynamic inconsistency and diversification bias in sequential versus simultaneous choice problems, and with plausible but contrasting risk attitudes across small- and large-stakes gambles.bounded rationality, complexity, search

Efficient Nash Equilibrium under Adverse Selection

This paper revisits the problem of adverse selection in the insurance market of Rothschild and Stiglitz (1976). We propose a simple extension of the game-theoretic structure in Hellwig (1987) under which Nash-type strategic interaction between the informed customers and the uninformed firms results always in a particular separating equilibrium. The equilibrium allocation is unique and Pareto-efficient in the interim sense subject to incentive-compatibility and individual rationality. In fact, it is the unique neutral optimum in the sense of Myerson (1983).Insurance Market; Adverse Selection; Incentive Efficiency

The determinants of Greek household indebtedness and financial stress

The paper uses data from the household survey conducted by the Bank of Greece in 2007 and investigates how various socioeconomic characteristics of households, such as income and wealth, household size, the age, education level and tenure of employment of the household head, are related with the probability of having a loan, the distribution of the financial stress as is measured by the debt service cost to income ratio, and also with the proper or not servicing of their loans. Most of the characteristics examined were found to be associated with the household’s probability of having a loan. Financial stress tends to decline as household income and net wealth increase, while certain household characteristics were also found to affect households’ capacity to service properly their debt obligations.household indebtedness; debt service

Poisson Yang-Baxter maps with binomial Lax matrices

A construction of multidimensional parametric Yang-Baxter maps is presented. The corresponding Lax matrices are the symplectic leaves of first degree matrix polynomials equipped with the Sklyanin bracket. These maps are symplectic with respect to the reduced symplectic structure on these leaves and provide examples of integrable mappings. An interesting family of quadrirational symplectic YB maps on $\mathbb{C}^4 \times \mathbb{C}^4$ with $3\times 3$ Lax matrices is also presented.Comment: 22 pages, 3 figure

Other Assets' Risk: Asset-Prices and Perceptions of Asset-Risk

Due to wealth effects, the price of a security may vary with the realization of an underlying risk factor even when the security's dividend is independent of that factor. This paper highlights a crucial component of these effects hitherto ignored by the literature: changes in wealth do not alter only an agent's risk aversion, but also her perceived "riskiness" of the security. The latter enhances significantly the extent to which market-clearing leads to endogenously-generated correlation across asset prices and returns, over and above that induced by correlation between payoffs, giving the appearance of "contagion".General Equilibrium Asset-Pricing; Lucas Trees; Contagion

CIN2+ detection of the HPV DNA Array genotyping assay in comparison with the Cobas 4800 HPV test and cytology

BACKGROUND: HPV DNA Array is an E1-targeting PCR genotyping test, with capability of distinguishing 18 high-risk (16, 18, 26, 31, 33, 35, 39, 45, 51, 52, 53, 56, 58, 59, 66, 68, 73, 82) and 11 low-risk HPV types (6, 11, 40, 42, 44, 54, 67, 69, 70, 85, 97). HPV DNA Array uses multiplex PCR for E1-gene sequence amplification. The amplicons are detected and genotyped by reverse hybridization to immobilized DNA probes spotted as triplets in single 96 well-plate wells and read by AID ELISPOT reader. METHODS: Aim of the study was to evaluate the clinical performance of the assay against internationally accepted and FDA approved Cobas 4800 HPV test (Roche Diagnostics). Study population comprised of 500 cervical samples. RESULTS: HPV DNA Array demonstrated a very high sensitivity of 100% for CIN2+ and 100% for CIN3+ detection, same as Cobas 4800. HPV DNA Array showed greater sensitivity for CIN2+ detection than cytology (100% vs. 13.6%). The agreement to Cobas 4800 for HPV detection, irrespective of type, was 81.4% with κ = 0.613. The agreement for HPV 16 was 92.8% (κ = 0.929), and for HPV 18 54.2% (κ = 0.681). CONCLUSION: HPV DNA Array demonstrated good clinical performance for detection of high-grade lesions, and may be considered for usage in a screening setting

Critical Biot Number of a Periodic Array of Rectangular Fins

We consider the heat transfer problem associated with a periodic array of rectangular fins subjected to convection heat transfer with a uniform heat transfer coefficient. Our analysis differs from the classical approach as (i) we consider two-dimensional (2D) heat conduction and (ii) the wall, to which the fins are attached, is included in the analysis

Mechanisms of linezolid resistance among coagulase-negative staphylococci determined by whole-genome sequencing.

UnlabelledLinezolid resistance is uncommon among staphylococci, but approximately 2% of clinical isolates of coagulase-negative staphylococci (CoNS) may exhibit resistance to linezolid (MIC, ≥8 µg/ml). We performed whole-genome sequencing (WGS) to characterize the resistance mechanisms and genetic backgrounds of 28 linezolid-resistant CoNS (21 Staphylococcus epidermidis isolates and 7 Staphylococcus haemolyticus isolates) obtained from blood cultures at a large teaching health system in California between 2007 and 2012. The following well-characterized mutations associated with linezolid resistance were identified in the 23S rRNA: G2576U, G2447U, and U2504A, along with the mutation C2534U. Mutations in the L3 and L4 riboproteins, at sites previously associated with linezolid resistance, were also identified in 20 isolates. The majority of isolates harbored more than one mutation in the 23S rRNA and L3 and L4 genes. In addition, the cfr methylase gene was found in almost half (48%) of S. epidermidis isolates. cfr had been only rarely identified in staphylococci in the United States prior to this study. Isolates of the same sequence type were identified with unique mutations associated with linezolid resistance, suggesting independent acquisition of linezolid resistance in each isolate.ImportanceLinezolid is one of a limited number of antimicrobials available to treat drug-resistant Gram-positive bacteria, but resistance has begun to emerge. We evaluated the genomes of 28 linezolid-resistant staphylococci isolated from patients. Multiple mutations in the rRNA and associated proteins previously associated with linezolid resistance were found in the isolates investigated, underscoring the multifocal nature of resistance to linezolid in Staphylococcus. Importantly, almost half the S. epidermidis isolates studied harbored a plasmid-borne cfr RNA methylase gene, suggesting that the incidence of cfr may be higher in the United States than previously documented. This finding has important implications for infection control practices in the United States. Further, cfr is commonly detected in bacteria isolated from livestock, where the use of phenicols, lincosamides, and pleuromutilins in veterinary medicine may provide selective pressure and lead to maintenance of this gene in animal bacteria