Survival with ambiguity

We analyze a market populated by expected utility maximizers and smooth ambiguity-averse consumers. We study conditions under which ambiguity-averse consumers survive and a¤ect prices in the limit. If ambiguity vanishes with time or if the economy exhibits no aggregate risk, ambiguity-averse consumers survive, but have no long-run impact on prices. In both scenarios, ambiguity-averse consumers are fully insured against ambiguity in equilibrium and, thus, behave as expected utility maximizers with correct beliefs. If ambiguity-averse consumers are not fully insured against ambiguity, they behave as expected utility maximiz- ers with e¤ectively wrong beliefs and an e¤ective discount factor which might be higher or lower than their actual discount factor. Using this in- sight, we demonstrate that consumers with constant absolute ambiguity aversion vanish in expectations, whenever the economy faces aggregate risk. In contrast, consumers with constant relative (and thus, decreas- ing absolute) ambiguity aversion survive in expectation and with positive probability and have a non-trivial impact on prices in the limit

Exergy dynamics of systems in thermal or concentration non-equilibrium

The paper addresses the problem of the existence and quantification of the exergy of non-equilibrium systems. Assuming that both energy and exergy are a priori concepts, the Gibbs "available energy" A is calculated for arbitrary temperature or concentration distributions across the body, with an accuracy that depends only on the information one has of the initial distribution. It is shown that A exponentially relaxes to its equilibrium value, and it is then demonstrated that its value is different from that of the non-equilibrium exergy, the difference depending on the imposed boundary conditions on the system and thus the two quantities are shown to be incommensurable. It is finally argued that all iso-energetic non-equilibrium states can be ranked in terms of their non-equilibrium exergy content, and that each point of the Gibbs plane corresponds therefore to a set of possible initial distributions, each one with its own exergy-decay history. The non-equilibrium exergy is always larger than its equilibrium counterpart and constitutes the "real" total exergy content of the system, i.e., the real maximum work extractable from the initial system. A systematic application of this paradigm may be beneficial for meaningful future applications in the fields of engineering and natural science

Social networks and trust: not the experimental evidence you may expect

We run a laboratory experiment where 'friendship' networks are generated endogenously within an anonymous group. Our experiment builds on two phases in sequence: a network formation game and a trust game. We find that in those sessions where the trust game is played before the network formation game, the overall level of trust is not significantly different from the one observed in a simple trust game; in those sessions where the trust game is played after the network formation game we find that the overall level of trust is significantly lower than in the simple trust game. Hence surprisingly trust does not increase because of 'enforced reciprocity' and moreover a common social history does affect the level of trust, but in a negative manner. Where network effects matter is in the choice of whom to trust: while we tend to trust less on average those with whom we have already interacted compared to total strangers, past history allows us to select whom to trust relatively more than others

Extrapolation in Games of Coordination and Dominance Solvable Games

We study extrapolation between games in a laboratory experiment. Participants in our experiment first play either the dominance solvable guessing game or a Coordination version of the guessing game for five rounds. Afterwards they play a 3x3 normal form game for ten rounds with random matching which is either a game solvable through iterated elimination of dominated strategies (IEDS), a pure Coordination game or a Coordination game with pareto ranked equilibria. We find strong evidence that participants do extrapolate between games. Playing a strategically different game hurts compared to the control treatment where no guessing game is played before and in fact impedes convergence to Nash equilibrium in both the 3x3 IEDS and the Coordination games. Playing a strategically similar game before leads to faster convergence to Nash equilibrium in the second game. In the Coordination games some participants try to use the first game as a Coordination device. Our design and results allow us to conclude that participants do not only learn about the population and/or successful actions, but that they are also able to learn structural properties of the games.Game Theory, Learning, Extrapolation

Behavioural patterns in social networks

In this paper, we focus on the analysis of individual decision making for the formation of social networks, using experimentally generated data. We first analyse the determinants of the individual demand for links under the assumption of agents' static expectations. The results of this exercise subsequently allow us to identify patterns of behaviour that can be subsumed in three strategies of link formation: 1) reciprocator strategy - players propose links to those from whom they have received link proposals in the previous round; 2) myopic best response strategy - players aim to profit from maximisation; 3) opportunistic strategy - players reciprocate link proposals to those who have the largest number of connections. We find that these strategies explain approximately 76% of the observed choices. We finally estimate a mixture model to highlight the proportion of the population who adopt each of these strategies

Strategies in social network formation

We run a computerised experiment of network formation where all connections are beneficial and only direct links are costly. Players simultaneously submit link proposals; a connection is made only when both players involved agree. We use both simulated and experimentally generated data to test the determinants of individual behaviour in network formation. We find that approximately 40% of the network formation strategies adopted by the experimental subjects can be accounted for as best responses. We test whether subjects follow alternative patterns of behaviour and in particular if they: propose links to those from whom they have received link proposals in the previous round; propose links to those who have the largest number of direct connections. We find that together with best response behaviour, these strategies explain approximately 75% of the observed choices. We estimate individual propensities to adopt each of these strategies, controlling for group effects. Finally we estimate a mixture model to highlight the proportion of each type of decision maker in the population

Elective affinities

We propose a marriage model where assortative matching results in equilibrium for reasons other than those driving similar results in the search and matching literature. A marriage is a joint venture where husband and wife contribute to the couple’s welfare by allocating their time to portfolios of risky activities. Men and women are characterised by different preferences over risk and the optimal match is between partners with the same level of risk aversion. In our model no two men (women) rank the same woman (men) as most desirable. Given that there is no unanimous ranking of candidates, everyone marries in equilibrium their most preferred partne

Neural networks for small scale ORC optimization

This study concerns a thermodynamic and technical optimization of a small scale Organic Rankine Cycle system for waste heat recovery applications. An Artificial Neural Network (ANN) has been used to develop a thermodynamic model to be used for the maximization of the production of power while keeping the size of the heat exchangers and hence the cost of the plant at its minimum. R1234yf has been selected as the working fluid. The results show that the use of ANN is promising in solving complex nonlinear optimization problems that arise in the field of thermodynamics

Strategies in Social Network Formation

We run a computerised experiment of network formation where all connections are beneficial and only direct links are costly. Players simultaneously submit link proposals; a connection is made only when both players involved agree. We use both simulated and experimentally generated data to test the determinants of individual behaviour in network formation. We find that approximately 40% of the network formation strategies adopted by the experimental subjects can be accounted for as best responses. We test whether subjects follow alternative patterns of behaviour and in particular if they: propose links to those from whom they have received link proposals in the previous round; propose links to those who have the largest number of direct connections. We find that together with best response behaviour, these strategies explain approximately 75% of the observed choices. We estimate individual propensities to adopt each of these strategies, controlling for group effects. Finally we estimate a mixture model to highlight the proportion of each type of decision maker in the population.network formation, experiments, mixture models