Decision Theory and Choices: a Complexity Approach (eBook)

Title Page 3
Copyright Page 4
Preface 5
References 9
Table of Contents 10
List of Contributors 12
Part I General Issues 14
Coherence, Complexity and Creativity: the Dynamics of Decision Making 15
1 Introduction 16
2 How We See: Processing Visual Events 16
3 The Scientific Insight 21
3.1 Deterministic Chaos and Its Control 21
3.2 Stabilizing a Perception (Sensorial Input) 23
3.3 From Perception to Cognition – Creativity 24
4 Conclusions 29
References 32
Complexity Theoretic Bounded Rationality and Satisficing 34
1 Homage to Salzano – A Preamble 35
2 Standing on Simon’s Shoulders 37
3 Bounded Rationality as a Superset of Olympian Rationality 41
4 Computable Rational Agents and Satisficing 43
4.1 Rational Choice as a Computation by a Universal Turing Machine 43
5 Concluding Notes 45
References 46
Optimisation and “Thoughtful Conjecturing” as Principles of Analytical Guidance in Social Decision Making 48
1 Introduction 48
2 Naive Evaluations and Forecasting 54
3 Forecasting and Opportunity Values 56
4 The Case of Multiple Goals 58
5 Multiple Goals and the Flaw of Cost Benefit Economists 60
6 Statistical Decision Analysis (SDA), the Framing of Conjectures and Inter-subjective Communication 61
7 Probabilities of Error in Models’ Selection 63
8 Evaluation as a Rhetorical Device 64
9 Why the Use of Market Values is Deceptive 66
10 Asymmetric Information and the Reputation of the Decision-maker 68
11 The Case of Innovative Decisions 69
12 The Importance of the Problematical Environment 71
References 72
Part II Agent Based Models 75
A New Agent-based Tool to Build Artificial Worlds 76
1 A few Notes on Agents and Complexity 76
2 From a “Classical” Protocol to a New Tool 80
2.1 The Swarm Protocol 80
2.2 The Swarm-like Agent Protocol in Python (SLAPP) 81
3 Creating an Imaginary Artificial World: the Surprising Behavior of Learning Chameleons 82
3.1 The Structure of the Chameleon World 82
3.2 Reinforcement Learning 82
3.3 Results in Chameleon Behavior 84
4 Recreating an Actual World in an Artificial Way: Interbank Payments 85
4.1 The Payment Problem 85
4.2 Two Parallel Systems 85
4.3 A Case of Simulated Behavior 87
Future Developments 89
References 90
Exploration Modes and Its Impact on Industry Profitability The Differentiated Effects of Internal and External Ways to Access Market Knowledge 91
1 Introduction 92
2 The Hypotheses 94
3 The Model Structure 100
4 The Main Results 105
5 Discussion and Conclusion 115
References 118
Financial Fragility and Interacting Units: an Exercise 124
1 Introduction 124
2 The Model 125
2.1 Price Dynamics 125
2.1.1 Desired Financial Ratio, Intertemporal Financial Ratio and Inflation Rate 127
3 Simulation Results: Endogenous Fluctuations and Bankrupcy 129
4 Conclusions 131
Appendix 131
References 133
Part III Techniques and Tools 134
Using Homogeneous Groupings in Portfolio Management 135
1 The Two Perspectives for Topological Fuzzification in Economy 135
2 The Hypothesis of a Referential Set of Referentials 138
3 The Dual Approach 141
4 Relation Between the Two Topologies 143
5 Algorithm for the Maximum Relations Between the Titles and the Attributes 148
6 Conclusions 150
References 150
Elman Nets for Credit Risk Assessment 152
1 Introduction 152
2 Credit Risk 153
2.1 Basel Committee on Banking Supervision 154
3 Neural Networks 156
3.1 An Introduction to Neural Networks 156
3.2 Learning Algorithms 158
3.3 Related Works 159
4 DataSet 161
4.1 Data Pre-Processing 162
4.1.1 Missing and Wrong Values 162
4.1.2 Erasing Useless Indices 163
4.1.3 Data Normalisation 163
4.1.4 Correlation Analysis 164
5 Experimental Analysis 164
6 Discussion of Results 169
7 Conclusions 170
References 171
Part IV Modeling from Physics 173
From Chemical Kinetics to Models of Acquisition of Information: On the Importance of the Rate of Acquisition of Information 174
1 Introduction 174
2 The Evolution of Student’s State with Learning 176
3 A Verhulst-like Model 178
3.1 Some Limitations of the Model 180
4 Finite Time Intervals 181
4.1 A Discrete-time Verhulst-like Model for a Single Student 181
4.2 A Discrete-time Verhulst-like Model for Two Students 182
5 Conclusions 184
References 184
Thermodynamic-like Approach to Complexity of the Financial Market (in the Light of the Present Financial Crises) 186
1 Introduction 186
2 Ideal Thermodynamic-like Cycle at the Financial Market 192
3 A Role of Mass-media, a Financial Perpetuum Mobile 193
4 Maxwell Demon, Financial Version 194
5 More Complicated Financial Thermodynamic-like Cycle 195
6 Complex Financial Heat Machines 197
7 Comparison of Thermodynamic (Carnot) and Financial Cycles 200
8 Entropy-temperature Diagram 202
Conclusion 204
References 205
A Physicist’s Approach to Phase Controlling Chaotic Economic Models 207
1 Introduction 207
2 The Cobweb Model with Adaptive Price Expectations 208
3 Phase Control in the Quadratic Map 210
4 Conclusions 212
References 212
Part V Related Issues 213
A Note on Complaints and Deprivation 214
1 Introduction 214
2 Basic Framework 215
3 From Complaints to Inequality 217
4 Conclusive Remarks 219
Appendix 220
References 220
Predictability of SOC Systems. Technological Extreme Events 221
1 Introduction 221
2 Extreme Events on Complex Adaptive Systems 225
3 Complex Adaptive Approaches in Self-Organised Criticality Systems 226
3.1 Computer Networks as SOC Complex Systems 228
4 Predictability and Exploratory Models 229
4.1 Ensemble 230
4.2 Exploratory Model for a Computer Network 231
5 Concluding Remarks 233
References 233
Ontology Based Risk Management 235
1 Introduction 235
2 Preliminary Definitions 237
3 A Metamodel for Distributed Risk Management 239
4 Case Study 1: Risk Management in a Distributed Software Projects 243
5 Case Study 2: The Monitoring of Environmental Risks 247
6 Conclusions 250
References 251