Influence of external information in the minority game

The influence of a fixed number of agents with the same fixed behavior on the dynamics of the minority game is studied. Alternatively, the system studied can be considered the minority game with a change in the comfort threshold away from half filling. Agents in the frustrated, non ergodic phase tend to overreact to the information provided by the fixed agents, leading not only to large fluctuations, but to deviations of the average occupancies from their optimal values. Agents which discount their impact on the market, or which use individual strategies reach equilibrium states, which, unlike in the absence of the external information provided by the fixed agents, do not give the highest payoff to the collective.Comment: 8 pages, 6 figure

Elimination of systemic risk in financial networks by means of a systemic risk transaction tax

Financial markets are exposed to systemic risk (SR), the risk that a major fraction of the system ceases to function, and collapses. It has recently become possible to quantify SR in terms of underlying financial networks where nodes represent financial institutions, and links capture the size and maturity of assets (loans), liabilities, and other obligations, such as derivatives. We demonstrate that it is possible to quantify the share of SR that individual liabilities within a financial network contribute to the overall SR. We use empirical data of nationwide interbank liabilities to show that the marginal contribution to overall SR of liabilities for a given size varies by a factor of a thousand. We propose a tax on individual transactions that is proportional to their marginal contribution to overall SR. If a transaction does not increase SR it is tax-free. With an agent-based model (CRISIS macro-financial model) we demonstrate that the proposed "Systemic Risk Tax" (SRT) leads to a self-organised restructuring of financial networks that are practically free of SR. The SRT can be seen as an insurance for the public against costs arising from cascading failure. ABM predictions are shown to be in remarkable agreement with the empirical data and can be used to understand the relation of credit risk and SR.Comment: 18 pages, 7 figure

Division of Labour and Social Coordination Modes : A simple simulation model

This paper presents a preliminary investigation of the relationship between the process of functional division of labour and the modes in which activities and plans are coordinated. We consider a very simple production process: a given heap of bank-notes has to be counted by a group of accountants. Because of limited individual capabilities and/or the possibilities of mistakes and external disturbances, the task has to be divided among several accountants and a hierarchical coordination problem arises. We can imagine several different ways of socially implementing coordination of devided tasks. 1) a central planner can compute the optimal architecture of the system; 2) a central planner can promote quantity adjustments by moving accountants from hierarchical levels where there exist idle resources to levels where resources are insufficient; 3) quasi-market mechanisms can use quantity or price signals for promoting decentralized adjustments. By means of a simple simulation model, based on Genetic Algorithms and Classifiers Systems, we can study the dynamic efficiency properties of each coordination mode and in particular their capability, speed and cost of adaptation to changing environmental situations (i.e. variations of the size of the task and/or variations of agents' capabilities). Such interesting issues as returns to scale, specialization and workers exploitation can be easily studied in the same model

Dynamical origins of the community structure of multi-layer societies

Social structures emerge as a result of individuals managing a variety of different of social relationships. Societies can be represented as highly structured dynamic multiplex networks. Here we study the dynamical origins of the specific community structures of a large-scale social multiplex network of a human society that interacts in a virtual world of a massive multiplayer online game. There we find substantial differences in the community structures of different social actions, represented by the various network layers in the multiplex. Community size distributions are either similar to a power-law or appear to be centered around a size of 50 individuals. To understand these observations we propose a voter model that is built around the principle of triadic closure. It explicitly models the co-evolution of node- and link-dynamics across different layers of the multiplex. Depending on link- and node fluctuation rates, the model exhibits an anomalous shattered fragmentation transition, where one layer fragments from one large component into many small components. The observed community size distributions are in good agreement with the predicted fragmentation in the model. We show that the empirical pairwise similarities of network layers, in terms of link overlap and degree correlations, practically coincide with the model. This suggests that several detailed features of the fragmentation in societies can be traced back to the triadic closure processes.Comment: 8 pages, 6 figure

Projected Stochastic Gradients for Convex Constrained Problems in Hilbert Spaces

Convergence of a projected stochastic gradient algorithm is demonstrated for convex objective functionals with convex constraint sets in Hilbert spaces. In the convex case, the sequence of iterates ${u_n}$ converges weakly to a point in the set of minimizers with probability one. In the strongly convex case, the sequence converges strongly to the unique optimum with probability one. An application to a class of PDE constrained problems with a convex objective, convex constraint and random elliptic PDE constraints is shown. Theoretical results are demonstrated numerically.Comment: 28 page

Conflicting Views on Fair Siting Processes: Evidence from Austria and the U.S.

The authors maintain that, by granting legitimacy to different notions of fairness and building on common values such as responsibility, it is possible to design siting procedures that promote social cohesion, trust and a sense of fair play

Beyond pairwise strategy updating in the prisoner's dilemma game

In spatial games players typically alter their strategy by imitating the most successful or one randomly selected neighbor. Since a single neighbor is taken as reference, the information stemming from other neighbors is neglected, which begets the consideration of alternative, possibly more realistic approaches. Here we show that strategy changes inspired not only by the performance of individual neighbors but rather by entire neighborhoods introduce a qualitatively different evolutionary dynamics that is able to support the stable existence of very small cooperative clusters. This leads to phase diagrams that differ significantly from those obtained by means of pairwise strategy updating. In particular, the survivability of cooperators is possible even by high temptations to defect and over a much wider uncertainty range. We support the simulation results by means of pair approximations and analysis of spatial patterns, which jointly highlight the importance of local information for the resolution of social dilemmas.Comment: 9 two-column pages, 5 figures; accepted for publication in Scientific Report

Cheating is evolutionarily assimilated with cooperation in the continuous snowdrift game

It is well known that in contrast to the Prisoner's Dilemma, the snowdrift game can lead to a stable coexistence of cooperators and cheaters. Recent theoretical evidence on the snowdrift game suggests that gradual evolution for individuals choosing to contribute in continuous degrees can result in the social diversification to a 100% contribution and 0% contribution through so-called evolutionary branching. Until now, however, game-theoretical studies have shed little light on the evolutionary dynamics and consequences of the loss of diversity in strategy. Here we analyze continuous snowdrift games with quadratic payoff functions in dimorphic populations. Subsequently, conditions are clarified under which gradual evolution can lead a population consisting of those with 100% contribution and those with 0% contribution to merge into one species with an intermediate contribution level. The key finding is that the continuous snowdrift game is more likely to lead to assimilation of different cooperation levels rather than maintenance of diversity. Importantly, this implies that allowing the gradual evolution of cooperative behavior can facilitate social inequity aversion in joint ventures that otherwise could cause conflicts that are based on commonly accepted notions of fairness.Comment: 30 pages, 3 tables, 5 figure

What is the Minimal Systemic Risk in Financial Exposure Networks?

Management of systemic risk in financial markets is traditionally associated with setting (higher) capital requirements for market participants. There are indications that while equity ratios have been increased massively since the financial crisis, systemic risk levels might not have lowered, but even increased. It has been shown that systemic risk is to a large extent related to the underlying network topology of financial exposures. A natural question arising is how much systemic risk can be eliminated by optimally rearranging these networks and without increasing capital requirements. Overlapping portfolios with minimized systemic risk which provide the same market functionality as empirical ones have been studied by [pichler2018]. Here we propose a similar method for direct exposure networks, and apply it to cross-sectional interbank loan networks, consisting of 10 quarterly observations of the Austrian interbank market. We show that the suggested framework rearranges the network topology, such that systemic risk is reduced by a factor of approximately 3.5, and leaves the relevant economic features of the optimized network and its agents unchanged. The presented optimization procedure is not intended to actually re-configure interbank markets, but to demonstrate the huge potential for systemic risk management through rearranging exposure networks, in contrast to increasing capital requirements that were shown to have only marginal effects on systemic risk [poledna2017]. Ways to actually incentivize a self-organized formation toward optimal network configurations were introduced in [thurner2013] and [poledna2016]. For regulatory policies concerning financial market stability the knowledge of minimal systemic risk for a given economic environment can serve as a benchmark for monitoring actual systemic risk in markets.Comment: 25 page

The evolution of cooperation by social exclusion

The exclusion of freeriders from common privileges or public acceptance is widely found in the real world. Current models on the evolution of cooperation with incentives mostly assume peer sanctioning, whereby a punisher imposes penalties on freeriders at a cost to itself. It is well known that such costly punishment has two substantial difficulties. First, a rare punishing cooperator barely subverts the asocial society of freeriders, and second, natural selection often eliminates punishing cooperators in the presence of non-punishing cooperators (namely, "second-order" freeriders). We present a game-theoretical model of social exclusion in which a punishing cooperator can exclude freeriders from benefit sharing. We show that such social exclusion can overcome the above-mentioned difficulties even if it is costly and stochastic. The results do not require a genetic relationship, repeated interaction, reputation, or group selection. Instead, only a limited number of freeriders are required to prevent the second-order freeriders from eroding the social immune system.Comment: 28 pages, 3 figures, supplementary material (materials and methods, and 6 supplementary figures