Table of Contents

Abstract: We submitted three models to the competition which were based on the I-SAW model. The models introduced four new assumptions. In the first model an adjustment process was introduced through which the tendency for exploration was higher at the beginning and decreased over time in the exploration stage. Another new assumption was that surprise as a factor influencing the weight of a trial in the sampling procedure was added. In the second model we added the possibility of an exclusion of unreliable experiences gained in the early trials of a game and the possibility of a revision of a reasonable alternative which was responsible for a very bad outcome in the previous trial. Three of the four added assumptions were combined in the third model. Because each of our models contains at least two new assumptions, we estimated the relative effect of each assumption on the estimation and prediction scores and carried out a test of robustness. In this way, we were able to clarify the usefulness of each added assumption.

Abstract: We characterize the structure of Nash equilibria for a certain class of asset market games. In equilibrium, different assets have different returns, and (risk neutral) investors with different wealth hold portfolios with different structures. In equilibrium, an asset’s return is inversely related to the elasticity of its supply. The larger an investor, the more diversified is his portfolio. Smaller investors do not hold all the assets, but achieve higher percentage returns. More generally, our results can be applied also to other “multi-market games” in which several players compete in several arenas simultaneously, like multi-market Cournot oligopolies, or multiple rent-seeking games.