Evolutionary prisoner’s dilemma game on weighted scale-free networks

This paper investigates the evolutionary prisoner’s dilemma on weighted scale-free networks. The weighted networks are generated by adopting Barabási-Albert scale-free network and assigning link weight with w_ij=(k_i×k_j)^β. Simulation results show that the cooperation frequency has a strong dependence on β. The value of β which is associated with the maximal cooperation frequency has been sought out. Moreover, Gini coefficient and Pareto exponent of the system’s wealth distribution are investigated. The inequality of wealth distribution is minimized at β≈−1.     

Herd behavior in weight-driven information spreading models for financial market

We study two weight-driven information spreading models for financial market. In these models, we find that the activity threshold below which the ‘financial crash’ occurs can be increased by uneven distribution of information weight, compared with Eguíluz and Zimmermann model [V.M. Eguíluz, M.G. Zimmermann, Phys. Rev. Lett. 85 (2000) 5659]. We also find that below the threshold the normalized return distribution, P(Z;Δt) satisfies P(Z=0;Δt)∼exp(−Δt/b) whereas P(Z=0;Δt)∼Δt^−τ above the threshold. Here Δt is the time interval where the normalized return is defined, Z(t,Δt)=Z(t+Δt)−Z(t). By approximating the relative increase of P(Z;Δt=1) for large Z as Gaussian distribution with non-zero mean, we show that the non-zero mean of the Gaussian distribution can cause such exponentially decaying behavior of P(Z=0;Δt).     

Effects of expectation and noise on evolutionary games

Considering the difference between the actual and expected payoffs, we bring a stochastic learning updating rule into an evolutionary Prisoners Dilemma game and the Snowdrift game on scale-free networks, and then investigate how the expectation level A and environmental noise κ influence cooperative behavior. Interestingly, numerical results show that the mechanism of promoting cooperation exhibits a resonance-like fashion including the coaction of A, κ and the payoff parameters. High cooperator frequency is induced by some optimal parameter regions. The variation of time series has also been investigated. This work could be of particular interest in the evolutionary game dynamics of biological and social systems.     

Evolutionary games on scale-free networks with a preferential selection mechanism

Considering the heterogeneity of individuals’ influence in the real world, we introduce a preferential selection mechanism to evolutionary games (the Prisoner’s Dilemma Game and the Snowdrift Game) on scale-free networks and focus on the cooperative behavior of the system. In every step, each agent chooses an individual from all its neighbors with a probability proportional to k^α indicating the influence of the neighbor, where k is the degree. Simulation results show that the cooperation level has a non-trivial dependence on α. To understand the effect of preferential selection mechanism on the evolution of the system, we investigate the time series of the cooperator frequency in detail. It is found that the cooperator frequency is greatly influenced by the initial strategy of hub nodes when α>0. This observation is confirmed by investigating the system behavior when some hub nodes’ strategies are fixed.     

Evolutionary Games on Weighted Newman-Watts Small-World Networks

We investigate the evolutionary prisoner＇s dilemma game （PDG） on weighted Newman-Watts （NW） networks. In weighted NW networks, the link weight ωij is assigned to the link between the nodes i and j as： ωij = （ki · kj）^β, where ki（kj） is the degree of node i（j） and β represents the strength of the correlations. Obviously, the link weight can be tuned by only one parameter β. We focus on the cooperative behavior and wealth distribution in the system. Simulation results show that the cooperator frequency is promoted by a large range of β and there is a minimal cooperation frequency around β = -1. Moreover, we also employ the Gini coefficient to study the wealth distribution in the population. Numerical results show that the Gini coefficient reaches its minimum when β≈ -1. Our work may be helpful in understanding the emergence of cooperation and unequal wealth distribution in society.     

Randomness Effect on Cooperation in Memory-Based Snowdrift Game

A memory-based snowdrift game (MBSG) on spatial small-world networks is investigated. It is found that cooperation rate versus temptation shows some step structures on small-world networks, similar to the case on regular lattices. With the increment of rewiring probability based on four-neighbourregular lattices, more steps are observable. Interestingly, it is observed that cooperation rate peaks at a specific value of temptation, which indicates that properly encouraging selfish actions may lead to better cooperative behaviours in the MBSG on small-world networks. Memory effects are also discussed for different rewiring probabilities. Furthermore, optimal regions arefound in the parameter planes. The strategy-related average degrees of individuals are helpful to understand the obtained results.     

Measuring statistical heterogeneity: The Pietra index

There are various ways of quantifying the statistical heterogeneity of a given probability law: Statistics uses variance — which measures the law’s dispersion around its mean; Physics and Information Theory use entropy — which measures the law’s randomness; Economics uses the Gini index — which measures the law’s egalitarianism. In this research we explore an alternative to the Gini index-the Pietra index-which is a counterpart of the Kolmogorov-Smirnov statistic. The Pietra index is shown to be a natural and elemental measure of statistical heterogeneity, which is especially useful in the case of asymmetric and skewed probability laws, and in the case of asymptotically Paretian laws with finite mean and infinite variance. Moreover, the Pietra index is shown to have immediate and fundamental interpretations within the following applications: renewal processes and continuous time random walks; infinite-server queueing systems and shot noise processes; financial derivatives. The interpretation of the Pietra index within the context of financial derivatives implies that derivative markets, in effect, use the Pietra index as their benchmark measure of statistical heterogeneity.     

Illusion of control in a Brownian game

Both single-player Parrondo games (SPPG) and multi-player Parrondo games (MPPG) display the Parrondo effect (PE) wherein two or more individually fair (or losing) games yield a net winning outcome if alternated periodically or randomly. (There is a more formal, less restrictive definition of the PE.) We illustrate that, when subject to an elementary optimization rule, the PG displays degraded rather than enhanced returns. Optimization provides only the illusion of control, when low-entropy strategies (i.e., which use more information) under-perform random strategies (with maximal entropy). This illusion is unfortunately widespread in many human attempts to manage or predict complex systems. For the PG, the illusion is especially striking in that the optimization rule reverses an already paradoxical-seeming positive gain—the Parrondo effect proper—and turns it negative. While this phenomenon has been previously demonstrated using somewhat artificial conditions in the MPPG [L. Dinis, J.M.R. Parrondo, Europhys. Lett. 63 (2003) 319; J.M.R. Parrondo, L. Dinis, J. Buceta, K. Lindenberg, Advances in Condensed Matter and Statistical Mechanics, E. Korutcheva, R. Cuerno (Eds.), Nova Science Publishers, New York, 2003], we demonstrate it in the natural setting of a history-dependent SPPG.     

Trading model with pair pattern strategies

A simple trading model based on pair pattern strategy space with holding periods is proposed. Power-law behavior is observed for the return variance σ², the price impact H and the predictability K for both models, with linear and square root impact functions. The sum of the traders’ wealth displays a positive value for the model with a square root price impact function, and a qualitative explanation is given based on the observation of the conditional excess demand 〈A|u〉. The cumulative wealth distribution also obeys a power-law behavior with an exponent close to that of real markets. An evolutionary trading model is further proposed. The elimination mechanism effectively changes the behavior of traders, and a power-law behavior is observed in the measure of zero return distribution P(r=0). The trading model with other types of traders, e.g., traders with the MG’s strategies and producers, are also carefully studied.     

Optimal trading strategies for Itô diffusion processes

In this paper we present a method for determining optimal trading strategies for Itô diffusion processes. By framing the problem in terms of the first passage time for the process we derive distribution and density functions for the trade length and use these functions to calculate the expected trading frequency for the strategy. The expected value and the variance of the rate of profit are obtained as functions of the return per trade and trading frequency. We present two measures for trade drawdown which may be used as constraints when determining an optimal strategy. The optimal strategy is calculated for the Ornstein-Uhlenbeck process by maximising the expected rate of profit.     

Inconsistency of the judgment matrix in the AHP method and the decision maker’s knowledge

In this paper, we propose a method for a quantitative estimation of the decision maker’s knowledge in the context of the Analytic Hierarchy Process (AHP) in cases where the judgment matrix is inconsistent. We show that the matrix of deviation from the transitivity condition corresponds to the rate matrix for transaction costs in the financial market. For the quantitative estimation of the decision maker’s professionalism, we apply the Ising model and thermodynamics tools.     

Modelling Moran Process with Network Dynamics for the Evolution of Cooperation

We introduce a simple model based on the Moran process with network dynamics. Using pair approximation, the cooperation frequencies at equilibrium states are deduced for general interactions. Three usual social dilemmas are discussed in the framework of our model. It is found that they all have a phase transition at the same value of cost-to-benefit ratio. For the prisoner＇s dilemma game, notably it is exactly the simple rule reported in the literature [Nature 441 （2006） 502]. In our model, the simple rule results from the parent-offspring link. Thus the basic mechanism for cooperation enhancement in network reciprocity is in line with the Hamilton rule of kin selection. Our simulations verify the analysis obtained from pair approximation.     

Economic uncertainty and econophysics

The objective of this paper is to provide a methodological link between econophysics and economics. I will study a key notion of both fields: uncertainty and the ways of thinking about it developed by the two disciplines. After having presented the main economic theories of uncertainty (provided by Knight, Keynes and Hayek), I show how this notion is paradoxically excluded from the economic field. In economics, uncertainty is totally reduced by an a priori Gaussian framework—in contrast to econophysics, which does not use a priori models because it works directly on data. Uncertainty is then not shaped by a specific model, and is partially and temporally reduced as models improve. This way of thinking about uncertainty has echoes in the economic literature. By presenting econophysics as a Knightian method, and a complementary approach to a Hayekian framework, this paper shows that econophysics can be methodologically justified from an economic point of view.     

The effects of behavioral and structural assumptions in artificial stock market

Recent literature has developed the conjecture that important statistical features of stock price series, such as the fat tails phenomenon, may depend mainly on the market microstructure. This conjecture motivated us to investigate the roles of both the market microstructure and agent behavior with respect to high-frequency returns and daily returns. We developed two simple models to investigate this issue. The first one is a stochastic model with a clearing house microstructure and a population of zero-intelligence agents. The second one has more behavioral assumptions based on Minority Game and also has a clearing house microstructure. With the first model we found that a characteristic of the clearing house microstructure, namely the clearing frequency, can explain fat tail, excess volatility and autocorrelation phenomena of high-frequency returns. However, this feature does not cause the same phenomena in daily returns. So the Stylized Facts of daily returns depend mainly on the agents’ behavior. With the second model we investigated the effects of behavioral assumptions on daily returns. Our study implicates that the aspects which are responsible for generating the stylized facts of high-frequency returns and daily returns are different.     

Local Minority Game with Evolutionary Strategies

We study a model of local minority game in the random Kauffman network with evolutionary strategies and propose three methods to update the strategy of poor agents, with lower points in a given generation： namely to update either the Boolean function of their strategies randomly, or their local information of randomly adjacent m agents, or the number m of randomly chosen adjacent agents. The results of extended numerical simulations show that the behaviour of strategies in the three methods may enhance significantly the entire coordination of agents in the system. It is also found that a poor agent tends to use both small m strategies and correlated strategies, and the strategies of agents will finally self-organize into a steady-state distribution for a long time playing of the game.     

Does the Compelled Cooperation Determine the Structure of a Complex Network？

Cooperation among individuals is considered to play an important role in the evolution of complex networked systems in physical, biological, economical and even epidemiological worlds, but its effects on the development of the systems is not so clear. We consider a specific kind of primal cooperation in a group of individuals, i.e., an individual never cooperates with others except when compelled to do so. The lowest level of compelled cooperation, in which cooperators share no message or resources, is investigated in the background of complex networks driven by the simple game rock-paper-scissors. Simulation results show that with the evolution of the systems, the cooperation will spread all over the networks, and finally results in systems with modular structures and a scale-free property.     

Wavelet multiscale analysis for Hedge Funds: Scaling and strategies

The wide acceptance of Hedge Funds by Institutional Investors and Pension Funds has led to an explosive growth in assets under management. These investors are drawn to Hedge Funds due to the seemingly low correlation with traditional investments and the attractive returns. The correlations and market risk (the Beta in the Capital Asset Pricing Model) of Hedge Funds are generally calculated using monthly returns data, which may produce misleading results as Hedge Funds often hold illiquid exchange-traded securities or difficult to price over-the-counter securities. In this paper, the Maximum Overlap Discrete Wavelet Transform (MODWT) is applied to measure the scaling properties of Hedge Fund correlation and market risk with respect to the S&P 500. It is found that the level of correlation and market risk varies greatly according to the strategy studied and the time scale examined. Finally, the effects of scaling properties on the risk profile of a portfolio made up of Hedge Funds is studied using correlation matrices calculated over different time horizons.     

City size distributions for India and China

This paper studies the size distributions of urban agglomerations for India and China. We have estimated the scaling exponent for Zipf’s law with the Indian census data for the years of 1981-2001 and the Chinese census data for 1990 and 2000. Along with the biased linear fit estimate, the maximum likelihood estimate for the Pareto and Tsallis q-exponential distribution has been computed. For India, the scaling exponent is in the range of [1.88, 2.06] and for China, it is in the interval [1.82, 2.29]. The goodness-of-fit tests of the estimated distributions are performed using the Kolmogorov-Smirnov statistic.     

Other-regarding preference and the evolutionary prisoner’s dilemma on complex networks

Prevailing models of the evolutionary prisoner’s game on networks always assume that agents are pursuing their own profit maximization. But the results from experimental games show that many agents have other-regarding preference. In this paper, we study the emergence of cooperation from the prisoner’s dilemma game on complex networks while some agents exhibit other-regarding preference such as inequality aversion, envious and guilty emotions. Contrary to common ideas, the simulation results show that the existence of inequality aversion agents does not promote cooperation emergence on a BA (Barabási and Albert) scale-free network in most situations. If the defection attraction is big and agents exhibit strong preference for inequality aversion, the frequency of cooperators will be lower than in situations where no inequality aversion agents exist. In some cases, the existence of the inequality agents will even induce the frequency of cooperators to zero, a feature which is not observed in previous research on the prisoner’s dilemma game when the underlying interaction topology is a BA scale-free network. This means that if an agent cares about equality too much, it will be difficult for cooperation to emerge and the frequency of cooperators will be low on BA networks. The research on the effect of envy or guilty emotions on the emergence of cooperation in the prisoner’s dilemma game on BA networks obtains similar results, though some differences exist. However, simulation results on a WS (Watts and Strogatz) small-world network display another scenario. If agents care about the inequality of agents very much, the WS network favors cooperation emergence in the prisoners’ dilemma game when other-regarding agents exist. If the agent weight on other-regarding is lowered, the cooperation frequencies emerging on a WS network are not much different from those in situations without other-regarding agents, although the frequency of cooperators is lower than those of the situation without other-regarding preference agents sometimes. All the simulation results imply that inequality aversion and its variations can have important effects on cooperation emergence in the prisoner’s dilemma game, and different network topologies have different effects on cooperation emergence in the prisoner’s dilemma game played on complex networks.     

Ideal free distribution or dynamic game? An agent-based simulation study of trawling strategies with varying information

An ecological economic model of trawling is presented to demonstrate the effect of trawling location choice strategy on net input (rate of economic gain of fish caught per time spent less costs). Fishing location choice is considered to be a dynamic process whereby trawlers chose from among a repertoire of plastic strategies that they modify if their gains fall below a fixed proportion of the mean gains of the fleet as a whole. The distribution of fishing across different areas of a fishery follows an approximate ideal free distribution (IFD) with varying noise due to uncertainty. The least-productive areas are not utilised because initial net input never reaches the mean yield of better areas subject to competitive exploitation. In cases, where there is a weak temporal autocorrelation between fish stocks in a specific location, a plastic strategy of local translocation between trawls mixed with longer-range translocation increases realised input. The trawler can change its translocation strategy in the light of information about recent trawling success compared to its long-term average but, in contrast to predictions of the Marginal Value Theorem (MVT) model, does not know for certain what it will find by moving, so may need to sample new patches. The combination of the two types of translocation mirrored beam-trawling strategies used by the Dutch fleet and the resultant distribution of trawling effort is confirmed by analysis of historical effort distribution of British otter trawling fleets in the North Sea. Fisheries exploitation represents an area where dynamic agent-based adaptive models may be a better representation of the economic dynamics of a fleet than classically inspired optimisation models.