Assumption Of Rationality Research Articles

Three Duopoly Game-Theoretic Models for the Smart Grid Demand Response Management Problem

Demand response management (DRM) significantly influences the prospective advancement of electricity smart grids. This paper introduces three distinct game-theoretic duopoly models for the smart grid demand response management problem. It delineates several rational assumptions regarding the model variables, functions, and parameters. The first model adopts a Cournot duopoly form, offering a unique closed-form equilibrium solution. The second model adopts a Stackelberg duopoly structure, also providing a unique closed-form equilibrium solution. Following a comparison of the economic viability of the two model equilibria and an assessment of their sensitivity to parametric changes, the paper proposes a third model with a Cartel structure and discusses its advantages over the earlier models. Finally, the paper examines how demand forecasting affects the equilibrium quantities and pricing solutions of each model.

Measuring and improving the cradle-to-grave environmental performance of urological procedures.

An urgent need for societal transformation exists to reduce the environmental impact of humanity, because environmental healthaffects human health. Health care causes ~5% of global greenhouse gas emissions and other substantial and ongoing environmental harms. Thus, health-care professionals and managers must lead ongoing efforts to improve the environmental performance of health systems. Life-cycle assessment (LCA) is a methodology that enables estimation of environmental impacts of products and processes. It models environmental effects from 'cradle' (raw material extraction) to 'grave' (end of useful life) and conventionally reports a range of different impact categories. LCA is a valuable tool when used appropriately. Maximizing its utility requires rational assumptions alongside careful consideration of system boundaries and data sources. Well-executed LCAs are detailed and transparently reported, enabling findings to be adapted or generalized to different settings. Attention should be given to modelling mitigation solutions in LCAs. This important step can guide health-care systems towards new and innovative solutions that embed progress towards international climate agreements. Many urological conditions are common, recurrent or chronic, requiring resource-intensive management with large associated environmental impacts. LCAs in urology have predominantly focussed on greenhouse gas emissions and have enabled identification of modifiable 'hotspots' including electricityuse, travel, single-use items, irrigation, reprocessing and waste incineration. However, the methodological and reporting quality of published urology LCAs generally requires improvement and standardization. Health-care evaluation and commissioning frameworks that value LCA findings alongside clinical outcomes and cost could accelerate sustainable innovations. Rapid implementation strategies for known environmentally sustainable solutions are also needed.

Breaking the Rationality Assumption

This paper explores the role of Behavioral Economics in understanding how psychological factors influence consumer decisions, often leading to irrational choices. Traditional economics assumes rational decision-making, but in reality, emotions, cognitive biases, and social factors drive behavior. The paper highlights how illiteracy impacts decision-making, forcing short-term thinking over long-term benefits. It also discusses how psychological barriers like overconfidence, peer pressure, and emotional responses prevent rational decisions. Several Indian government policies, such as the Population Control Policy, Reservation System, and Demonetization, are reviewed to show how poor execution can lead to negative consequences. The paper concludes by emphasizing the need for better education, critical thinking, and informed policymaking to improve decision-making and empower people to make rational choices. Effective decision-making requires understanding both economic and psychological factors, which can lead to more balanced, thoughtful choices for the betterment of society.

Understanding Behavioural Biases Driving Equity Investors in India: A Factor Analysis Approach

In the dynamic realm of equity investment decisions, this study challenges the traditional assumption of investor impartiality and rationality, arguing that investors’ choices are often shaped more by beliefs and psychological inclinations than by objective reasoning alone. Drawing from behavioural finance theory, which contests the adequacy of the standard finance model in capturing the nuances of decision-making, this research delves into the psychological forces influencing private investors. Recognizing the prevalent biases coloring their decisions, the study investigates common prejudices impacting investor choices. Leveraging survey data from 375 equity investors, the research employs exploratory factor analysis and regression models to disentangle the effects of cognitive biases, such as the gambler’s fallacy, overconfidence, aversion to ambiguity, lack of representativeness, aversion to loss, and anchoring. The findings challenge the assumption of investor rationality, offering valuable insights into the complexities of financial decision-making. Notably, the study underscores a robust and positive association between these biases and equity investment decisions, shedding light on the intricate interplay between psychological factors and investment behaviour.

Is it Irrational to Assume Rationality in Business?

Purpose: Academic research continuously introduces new theories, methodologies, etc. to improve upon prior studies. Researchers commonly base their theories on the assumption that managers and stakeholders have calculated motives and make well-educated decisions. However, they ignore the fact that certain corporate decisions are completely random with no logical explanations. Researchers still are not comfortable with this idea and always try to justify business decisions by advancing new sophisticated theories while in fact, many executives and stakeholders are not that sophisticated. This paper discusses such instances of irrationality. Methodology: This paper discusses several instances of irrational business decisions in various aspects of finance including capital budgeting, capital structure, stock buybacks, executive compensation, overinvestment, and stock market irregularities. By examining a historical set of corporate events, it is shown that various forms of irrationality, when abundant, may cause empirical studies to refute theories. Findings: Theories cannot always be justified by empirical work not necessarily because of flaws in these theories but possibly because of irrational behavior of ill-informed executives and stakeholders. That is, if the assumption of rationality commonly imbedded in academic studies does not hold, then it may be the culprit, at least in part, behind the discrepancy between theory and empirical findings. Unique Contribution to Theory, Practice and Policy: This paper postulates that the discrepancy between theory and empirical findings may, in part, be caused by the common assumption of rationality that may not hold true. By discussing numerous instances of irrational behavior in various aspects of business, this paper attempts to show that irrationality is not uncommon and should be considered in the design of academic research.

On the intersection form of fillings

AbstractWe prove, by an ad hoc method, that exact fillings with vanishing rational first Chern class of flexibly fillable contact manifolds have unique integral intersection forms. We appeal to the special Reeb dynamics (stronger than ADC in [Lazarev, Geom. Funct. Anal. 30 (2020), no. 1, 188–254]) on the contact boundary, while a more systematic approach working for general ADC manifolds is developed independently by Eliashberg, Ganatra and Lazarev. We also discuss cases where the vanishing rational first Chern class assumption can be removed. We derive the uniqueness of diffeomorphism types of exact fillings of certain flexibly fillable contact manifolds and obstructions to contact embeddings, which are not necessarily exact.

Количественный анализ финансовых инструментов на основе портфельной теории и теории игр

The article focuses on modern methods of quantitative analysis of financial instruments based on the Markowitz portfolio theory, which allows designing optimal portfolios of financial instruments under the assumption of extreme rationality of investors and game theory, which allows taking into account the factor of player interaction between those participating in financial markets. The relevance of the research topic concerns the need to improve the quality of financial decisions made in conditions of increased volatility of financial markets. An initial set of financial instruments was built, consisting of fifty alternative options for placing funds. A preliminary analysis of the initial set of financial instruments allowed us to narrow it down to ten elements that are most preferable for placing funds. The classic Markowitz portfolio model, which assumes maximizing the expected return on a portfolio at a given level of risk, is complemented by auxiliary constraints that allow taking into account individual investor preferences. The presented six modifications of Markowitz portfolios help to identify the dynamics of the quantitative characteristics of portfolios depending on the individual preferences of investors. Expected profitability and expected risk, estimated from real financial data, are accepted as quantitative characteristics of portfolios. The game model is constructed in the form of a game with nature, which allows taking into account the complex nature of player interaction, which in most cases is not characterized by antagonism. The game model is designed to select the optimal net strategy of the investor, which takes into account various financial market conditions expressed by a market index (market portfolio). The study of the game model is implemented on the basis of the integrated Hodge-Lehman criterion regarding profitability and risk. Its use made it possible to take into account the individual level of investor confidence in the available financial information. In the process of practical implementation of these techniques, results were obtained that allow us to conclude about the degree of sensitivity of optimal investment strategies to individual preferences and perceptions of investors. The constructed models can be used to update the content of professional training of students in the higher economic school system, as well as to set up courses of additional professional education.

Behavioral Finance: The Impact of Investor Expectation on Financial Decision-Making

Behavioral finance challenges traditional financial theories by questioning the assumption of investor rationality, highlighting the influence of cognitive biases, emotions, and psychological factors on decision-making. This deviation from conventional models like the Efficient Market Hypothesis recognizes the complexity of human decision-making in financial contexts. The field focuses on key phenomena: loss aversion, market anomalies, the framing effect, and the endowment effect. Loss aversion reveals a stronger reaction to losses than equivalent gains, influencing overly cautious decisions. Market anomalies, such as momentum and trend reversals, challenge efficient market expectations. The framing effect shows how decision-making is swayed by information presentation. The endowment effect impacts perceived asset value, affecting financial decisions. These biases significantly impact investor behavior, potentially leading to suboptimal portfolio choices. Recognizing these biases is crucial for making informed financial decisions. Behavioral finance research has profound implications, emphasizing the integration of behavioral insights with traditional models. Future studies should explore cumulative behavioral effects, conduct cross-cultural analyses, and investigate diverse market conditions for more effective investment strategies and regulations. Understanding global financial behavior through behavioral finance is essential for comprehensive insights into market dynamics and decision-making processes.

Does sadness bring myopia: an intertemporal choice experiment with college students.

While economics often interprets individual intertemporal choice preferences through the rationality assumption of utility maximization, the reality is that as emotional beings, individuals' preferences for intertemporal behavior are much more diverse and inconsistent. Prior research has predominantly focused on positive or negative emotions based on prospect theory, such as anxiety, anger, disgust, and depression. However, there has been relatively little research on how sadness affects individuals' preferences for immediate and future rewards. In this study, 170 college students are recruited as participants, and their emotions are primed with a video before engaging in an intertemporal task. Covariance analysis and logit regression model are established to examine the main and interactive effects of sadness on individuals' immediate reward preferences. The findings reveal that sadness led individuals to prefer smaller immediate rewards, demonstrating a more myopic behavioral pattern, but didn't affect time discount rate. As the reward baseline increases, sadness's impact on immediate reward preferences is more pronounced, exacerbating individuals' myopic behavior. In conclusion, these findings underscore the importance of considering emotional states in economic decision-making models and suggest avenues for future research to explore the complex dynamics of emotions and intertemporal choices.

Contextual Action Theory in Nursing Home Settings: A Conceptual Framework for Considering the Active Role of Residents

AbstractNursing home (NH) residents are often considered passive recipients of care with a limited role in shaping their experience. This perspective is often reproduced in NH research, which restricts resident participation, thereby upholding ageist views that cause discrimination of older adults living in NH settings. In this article, we propose using Contextual Action Theory (CAT) as a conceptual framework for exploring NH experiences in a way that incorporates the active role of residents. CAT supports the active role of NH residents by emphasizing the capabilities of human beings to form preferences and act on those preferences, without assumptions of rationality. The emphasis on human action allows researchers to consider NH experiences as co-constructed between residents, care providers, and family members, which means placing an emphasis on the actions and goals of NH residents, no matter their cognitive or physical impairments. CAT also supports personhood and social citizenship concerns in NH research, by acknowledging the differing preferences and thereby differing experiences of NH care by individual residents. We argue that CAT should be considered a useful framework for putting residents in the center of NH research.

Better Foundations for Subjective Probability

ABSTRACT How do we ascribe subjective probability? In decision theory, this question is often addressed by representation theorems, going back to Ramsey (1926), which tell us how to define or measure subjective probability by observable preferences. However, standard representation theorems make strong rationality assumptions, in particular expected utility maximization. How do we ascribe subjective probability to agents which do not satisfy these strong rationality assumptions? I present a representation theorem with weak rationality assumptions which can be used to define or measure subjective probability for partly irrational agents.

The choice of suppliers and consumers: the evolutionary game equilibrium of platforms

ABSTRACT Platforms competition affects both the structure of the whole industry and the fate of the individual companies within it. The extant studies either simply divide the participants of a platforms war into suppliers and consumers or adopt unbounded rationality assumptions. This paper constructs a game model that includes platforms, suppliers, and the final consumers. We analyze the condition and stability of each equilibrium and the impacts of the characteristics of the core and complementary products on the equilibrium by using the method of evolutionary game. Our results show the following: (1) If the two platforms initially have separate advantages in terms of the number of suppliers or consumers, there will be an equilibrium of the coexistence; otherwise, there will be an equilibrium of single platform dominating. (2) The equilibrium of a single platform dominating is more stable than that of the coexistence of multiple platforms. (3) Incidental shocks to the number of suppliers are more likely to break the coexistence equilibrium than consumers. (4) Platforms with poor core product quality and a high price for core and complementary products can coexist with other superior platforms only if the former has more consumers and suppliers at the beginning of the competition.

Evaluating the economic sustainability of commercial complex greening based on cost-benefit analysis: A case study of Singapore’s Shaw center

Commercial complex greening is the alternative to leading the greening development of public buildings, reducing the negative impact of buildings on the environment, and achieving sustainable development goals. However, the economic sustainability of commercial complex greening remains underinvestigated. This study investigated traditional building greening economic evaluation indicators and quantitative methods according to the characteristics of commercial complexes in to provide ideas on the economic evaluation of it to fill in the blanks of CBA analysis applied to the economics of greening systems of commercial buildings. Applying cost-benefit analysis, this study evaluated the economic sustainability of vertical greening systems (VGS) and green roof systems (GRS) installed on a commercial complex in Singapore using Net Present Value (NPV), Payback Period (PBP), and sensitivity analysis to quantify and integrate personal and social life cycle costs and benefits. The methodology was based on an extensive literature review in multiple fields and rational assumptions for unavailable data. The key findings were: 1) Commercial complex greening is a feasible investment. 2) VGS has a higher economic return value, whereas GRS can achieve faster payback. 3) Well-designed greening and vitality-boosting ideas bring more economic returns than tax incentives. 4) Property value improvement, maintenance cost, and fire risk reduction were sensitive factors affecting NPV, among which property value played a decisive role, especially for VGS. 5) Extensive construction and tax policies can reduce costs and improve the economy. 6) Personal benefits generated by greening are greater than social benefits. This critical case study of a commercial complex greening project provides greening developers and operators a better understanding of the economic competitiveness of commercial complex greening implementation to promote the market application and a rationale for governments to revise existing or formulate new measures to encourage the development of green industries. Although the conclusion of this study only focuses on the economic sustainability of greening in commercial complexes in Singapore due to sample size limitations, achieving a more significant localized evaluation is potential by collecting and replacing data corresponding to regions based on this research framework. Meanwhile, quantifying more economic indicators, comparing the economy of different greening modes in commercial complexes and arranging an international database about the economic sustainability of commercial complex greening are worth further exploration in the future.

Predicting Real-World Penny Auction Durations by Integrating Game Theory and Machine Learning

Game theory and machine learning are two widely used techniques for predicting the outcomes of strategic interactions among humans. However, the game theory-based approach often relies on strong rationality and informational assumptions, while the machine learning-based approach typically requires the testing data to come from the same distribution as the training data. Our work studies how to integrate the two techniques to address these weaknesses. We focus on the interactions among real bidders in penny auctions, and develop a three-stage framework to predict the distributions of auction durations, which indicate the numbers of bids and auctioneer revenues. Specifically, we first leverage a pre-trained neural network to encode the descriptions of products in auctions into embeddings. Second, we apply game theory models to make preliminary predictions of auction durations. In particular, we tackle the challenge of accurately inferring parameters in game theory models. Third, we develop a Multi-Branch Mixture Density Network to learn the mapping from product embeddings and game-theoretic predictions to the distributions of actual auction durations. Experiments on real-world penny auction data demonstrate that our framework outperforms both game theory-based and machine learning-based prediction approaches.

Is Bitcoin Future as Secure as We Think? Analysis of Bitcoin Vulnerability to Bribery Attacks Launched through Large Transactions

Bitcoin uses blockchain technology to maintain transactions order and provides probabilistic guarantees to prevent double-spending, assuming that an attacker’s computational power does not exceed 50% of the network power. In this article, we design a novel bribery attack and show that this guarantee can be hugely undermined. Miners are assumed to be rational in this setup, and they are given incentives that are dynamically calculated. In this attack, the adversary misuses the Bitcoin protocol to bribe miners and maximize their gained advantage. We will reformulate the bribery attack to propose a general mathematical foundation upon which we build multiple strategies. We show that, unlike Whale Attack, these strategies are practical, especially in the future when halvings lower the mining rewards. In the so-called “guaranteed variable-rate bribing with commitment” strategy, through optimization by Differential Evolution (DE), we show how double-spending is possible in the Bitcoin ecosystem for any transaction whose value is above 218.9BTC, and this comes with 100% success rate. A slight reduction in the success probability, e.g., by 10%, brings the threshold down to 165BTC. If the rationality assumption holds, then this shows how vulnerable blockchain-based systems like Bitcoin are. We suggest a soft fork on Bitcoin to fix this issue at the end.

Teaching behavioral macroeconomics—Examples and applications

The author of this article provides an example of how one might incorporate behavioral economics into teaching macroeconomics or labor economics at an undergraduate level. The focus is on two macroeconomic concepts—wage determination and the Phillips curve—and shows that the implications and conclusions of both models differ from their textbook versions, once behavioral aspects are taken into account. In order to do that, the author first presents the standard macroeconomic model in both cases, then stresses situations where homo economicus, i.e., the rationality assumption, does not hold, and finally introduces behavioral economics concepts that explain noted differences. The explanations are intertwined with small classroom experiments that can be part of the lecture and used to make the lecture more interesting and comprehensible.

A novel approach for quantifying upper reservoir leakage

During the operational phases of the upper reservoir in a pumped storage power station, the water level, leakage area, and hydraulic gradient of the upper reservoir alter dynamically due to the cyclic pumping and draining activities. The rising groundwater level during storage introduces distinct leakage conditions within the reservoir basin, characterized by unsaturated, partially saturated, and saturated states. Consequently, reservoir basin leakage exhibits variability across these states. To address this issue, this study formulated rational assumptions corresponding to the three leakage states in a reservoir basin and derived analytical expressions for seepage calculation based on Darcy's law and the principles governing groundwater flow refraction. A case study was conducted to investigate the relationship between various factors and leakage. The results showed that leakage primarily depended on the permeability of the impermeable layer in the reservoir basin. The upper reservoir leakage was estimated, and the calculated leakage generally agreed with the measurements, offering insights into the leakage mechanism of the Liyang pumped storage power station. In addition, the reasons for disparities between measured and calculated leakage were analyzed, and the reliability of the developed method was validated. The findings of this study provide a foundation for the seepage control design of upstream reservoirs in similar projects.

Quantal Response Equilibrium and Rationalizability: Inside the Black Box

This paper aims to connect epistemic and behavioral game theory by examining the epistemic foundations of quantal response equilibrium (QRE) in static games. We focus on how much information agents possess about the probability distributions of idiosyncratic payoff shocks, in addition to the standard assumptions of rationality and common belief in rationality. When these distributions are transparent, we obtain a solution concept called Δp-rationalizability, which includes action distributions derived from QRE; we also give a condition under which this relationship holds true in reverse. When agents only have common belief in the monotonicity of these distributions (for example, extreme value distributions), we obtain another solution concept called ΔM-rationalizability, which includes action distributions derived from rank-dependent choice equilibrium, a parameter-free variant of QRE. Our solution concepts also provide insights for interpreting experimental and empirical data.

Intuiciones y racionalidad ecológica

Through an ecological approach, it can be said that a person tries to identify the optimal action for him- or herself by a set of different possible actions through intuition. The debate about the ‘dual process theories’ takes up this idea and postulates two different ways to evaluate decision possibilities: A logical-analytical path and an intuitive (Magrabi and Bach, 2013). Predominantly, it is assumed that the logical-analytical path is related to rationality and therefore the path to strive for in rational decision-making. However, in science it has been shown that bounded rationality is to be assumed. Therefore, the question of the extent to which emotions or feelings, and in this context also intuitions, are rational has come to the fore (De Sousa, 1987; Evans and Cruse, 2004). In this paper, intuitions are considered as a feeling with intentionality: Intuitions always refer to an appropriate environment and are directed toward a decision that results in an action. With Damásio (1994, 2013) it can be shown that an intuition is a feeling that excels in acting as a cue or signal. With the assumption of an ecological rationality (Gigerenzer, Todd and ABC Research Group, 1999; Todd and Gigerenzer, 2012; Todd and Brighton, 2016), it can be shown that intuitive decisions are based on experiential knowledge and implicit structure recognition (Magrabi and Bach, 2013). Accordingly, with the approach of an ecological rationality it can be shown that an intuitive decision is rational in the sense that a person interacts quickly and energy-efficiently successfully adapted with his or her environment and thereby identifies the individual optimal action for him- or herself. This may then be recognized as a ‘gut feeling’ or ‘intuition’. Two challenges will be outlined explained in this paper: The influence of a negative environment on intuitive decisions, and the confusion of an intuition with an emotion or other feeling.

Radiation effect on stagnation point flow of Casson nanofluid past a stretching plate/cylinder

The exclusive behaviour of nanofluid has been actively emphasized due to the determination of improved thermal efficiency. Hence, the aim of this study is to highlight the laminar boundary layer axisymmetric stagnation point flow of Casson nanofluid past a stretching plate/cylinder under the influence of thermal radiation and suction/injection. Nanofluid comprises water and Fe3O4 as nanoparticles. In this article, a novel casson nanofluid model has been developed and studied on stretchable flat plate or circular cylinder. Adequate rational assumptions (velocity components) are employed for the transformation of the governing partial-differential equations into a group of non-dimensional ordinary-differential formulas, which are then solved analytically. The momentum and energy equations are solved through the complementary error function method and scaling quantities. Using various figures, the effects of essential factors on the nanofluid flow, heat transportation, and Nusselt number, are determined and explored. From obtained results, it is observed that the velocity field diminishes owing to magnification in stretching parameter B\\documentclass[12pt]{minimal} \\usepackage{amsmath} \\usepackage{wasysym} \\usepackage{amsfonts} \\usepackage{amssymb} \\usepackage{amsbsy} \\usepackage{mathrsfs} \\usepackage{upgreek} \\setlength{\\oddsidemargin}{-69pt} \\begin{document}$$B$$\\end{document} and Casson fluid parameter Λ\\documentclass[12pt]{minimal} \\usepackage{amsmath} \\usepackage{wasysym} \\usepackage{amsfonts} \\usepackage{amssymb} \\usepackage{amsbsy} \\usepackage{mathrsfs} \\usepackage{upgreek} \\setlength{\\oddsidemargin}{-69pt} \\begin{document}$$\\Lambda$$\\end{document}. The temperature field increases by amplifying radiation Nr\\documentclass[12pt]{minimal} \\usepackage{amsmath} \\usepackage{wasysym} \\usepackage{amsfonts} \\usepackage{amssymb} \\usepackage{amsbsy} \\usepackage{mathrsfs} \\usepackage{upgreek} \\setlength{\\oddsidemargin}{-69pt} \\begin{document}$$N_{r}$$\\end{document}, and solid volume fraction parameter ϕ\\documentclass[12pt]{minimal} \\usepackage{amsmath} \\usepackage{wasysym} \\usepackage{amsfonts} \\usepackage{amssymb} \\usepackage{amsbsy} \\usepackage{mathrsfs} \\usepackage{upgreek} \\setlength{\\oddsidemargin}{-69pt} \\begin{document}$$\\phi$$\\end{document}. The research is applicable to developing procedures for electric-conductive nanomaterials, which have potential applications in aircraft, smart coating transport phenomena, industry, engineering, and other sectors.