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http://hdl.handle.net/10419/43752
2016-05-02T19:49:16ZThe El Farol problem revisited
http://hdl.handle.net/10419/111064
Title: The El Farol problem revisited
Authors: Böhm, Volker
Abstract: The so-called El Farol problem describes a prototypical situation of interacting agents making binary choices to participate in a non-cooperative environment or to stay by themselves and choosing an outside option. In a much cited paper Arthur (1994) argues that persistent on-converging sequences of rates of participation with permanent forecasting errors occur due to the non-existence of a prediction model for agents to forecast the attendance appropriately to induce stable rational expectations solutions. From this he concludes the need for agents to use boundedly rational rules. This note shows that in a large class of such models the failure of agents to find rational prediction rules which stabilize is not due to a non-existence of perfect rules, but rather to the failure of agents to identify the correct class of predictors from which the perfect ones can be chosen. What appears as a need to search for boundedly rational predictors originates from the non existence of stable confirming self-referential orbits induced by predictors selected from the wrong class. Specifically, it is shown that, within a specified class of the model and due to a structural non-convexity (or discontinuity), symmetric Nash equilibria of the associated static game may fail to exist generically depending on the utility level of the outside option. If they exist, they may induce the least desired outcome while, generically, asymmetric equilibria are uniquely determined by a positive maximal rate of attendance. The sequential setting turns the static game into a dynamic economic law of the Cobweb type for which there always exist nontrivial ϵ-perfect predictors implementing ϵ-perfect steady states as stable outcomes. If zero participation is a Nash equilibrium of the game there exists a unique perfect predictor implementing the trivial equilibrium as a stable steady state. In general, Nash equilibria of the one-shot game are among the ϵ-perfect foresight steady states of the dynamic model. If agents randomize over indifferent decisions the induced random Cobweb law together with recursive predictors becomes an iterated function system (IFS). There exist unbiased predictors with associated stable stationary solutions for appropriate randomizations supporting nonzero asymmetric equilibria which are not mixed Nash equilibria of the one-shot game. However, the least desired outcome remains as the unique stable stationary outcome for ϵ = 0 if it is a Nash equilibrium of the static game.2015-01-01T00:00:00ZStock price related financial fragility and growth patterns
http://hdl.handle.net/10419/111071
Title: Stock price related financial fragility and growth patterns
Authors: Aßmuth, Pascal
Abstract: The total output of an economy usually follows cyclical movements which are accompanied by similar movements in stock prices. The common explanation relies on the demand side. It points out that stock market wealth drives consumption which triggers production afterward. This paper focuses on influences via the supply side of the economy. The aim of the paper is to explore channels where stock price patterns influence the amount of credit taken by firms. We examine trend and volatility cycles at the stock market for their impact on the real economy. For each one we find an application to the investment behaviour of firms. There are three channels addressed: the stock market valuation as piece of information for the assessment of a firm's creditworthiness, the influence on restructuring prospects in times of financial distress and the stock market related remuneration of the top management affecting capital demand. We ask to which extent a channel may contribute to the stock price - output relation when there is mutual feedback. A model à la Delli Gatti et al. (2005) drives the results. Firms take credit to finance their production which determines their financial fragility. If their stochastic revenue is too low, they are bankrupt and leave the economy. The capital loss hurts the bank's equity base and future credit supply is diminished. This causes business cycles. Results show that if the bank assesses creditworthiness according to the stock price then idiosyncratic stock price fluctuations have only a slight effect as they disturb selection and hinder growth. If stock market optimism matters for bankruptcy ruling the level of stock owners' influence does not matter. If optimism is wide spread among stock investors however, investment behaviour is also correlated through the stock prices and this results in huge real economy cycles without any long-term growth. If volatility is considered in the decision of managers they act more prudently and this fosters growth.2015-01-01T00:00:00ZDoes time pressure impair performance? An experiment on queueing behavior
http://hdl.handle.net/10419/111066
Title: Does time pressure impair performance? An experiment on queueing behavior
Authors: Conte, Anna; Scarsini, Marco; Sürücü, Oktay
Abstract: We experimentally explore the effects of time pressure on decision making. Under different time allowance conditions, subjects are presented with a queueing situation and asked to join one of two queues that differ in length, server speed, and entry fee. The results can be grouped under two main categories. The first one concerns the factors driving customers' decisions in a queueing system. Only a proportion of subjects behave rationally and use the relevant information effciently. The rest of the subjects seem to adopt a rule of thumb that ignores the information on server speed and follows the shorter queue. The second category is related to the effects of time pressure on decision performance. A significant proportion of the population is not affected by time limitations and shows a consistent behavior throughout the treatments. On the other hand, the majority of subjects' performance is impaired by time limitations. More importantly, this impairment is not due to the stringency of the limitation but mainly due to the fact that being exposed to a time limitation, even to a loose one, brings along stress and panic, and causes subjects to use time inefficiently.2015-01-01T00:00:00ZNetwork design and imperfect defense
http://hdl.handle.net/10419/111067
Title: Network design and imperfect defense
Authors: Landwehr, Jakob
Abstract: The question of how to optimally design an infrastructure network that may be subject to intelligent threats is of highest interest. We address this problem by considering a Designer-Adversary game of optimal network design for the case of imperfect node defense. In this two-stage game, first the Designer defends network connectivity by forming costly links and additionally protecting nodes. Then, the Adversary attacks a fixed number of nodes, aiming to disconnect the network. In contrast to the existing literature, defense is imperfect in the sense that defended nodes can still be destroyed with some fixed probability. We completely characterize the solution of the game for attack budgets of one and two nodes, while for larger budget we present a partial characterization of the solution. To do so, we determine the minimum number of links necessary to construct a network with any degree of connectivity and any given number of essential nodes.2015-01-01T00:00:00Z