Computational inference of neural information flow networks.

Determining how information flows along anatomical brain pathways is a fundamental requirement for understanding how animals perceive their environments, learn, and behave. Attempts to reveal such neural information flow have been made using linear computational methods, but neural interactions are known to be nonlinear. Here, we demonstrate that a dynamic Bayesian network (DBN) inference algorithm we originally developed to infer nonlinear transcriptional regulatory networks from gene expression data collected with microarrays is also successful at inferring nonlinear neural information flow networks from electrophysiology data collected with microelectrode arrays. The inferred networks we recover from the songbird auditory pathway are correctly restricted to a subset of known anatomical paths, are consistent with timing of the system, and reveal both the importance of reciprocal feedback in auditory processing and greater information flow to higher-order auditory areas when birds hear natural as opposed to synthetic sounds. A linear method applied to the same data incorrectly produces networks with information flow to non-neural tissue and over paths known not to exist. To our knowledge, this study represents the first biologically validated demonstration of an algorithm to successfully infer neural information flow networks.

Optimal Reporting Systems With Investor Information Acquisition

This paper analyzes a manager's optimal ex-ante reporting system using a Bayesian persuasion approach (Kamenica and Gentzkow (2011)) in a setting where investors affect cash flows through their decision to finance the firm's investment opportunities, possibly assisted by the costly acquisition of additional information (inspection). I examine how the informativeness and the bias of the optimal system are determined by investors' inspection cost, the degree of incentive alignment between the manager and the investor, and the prior belief that the project is profitable. I find that a mis-aligned manager's system is informative

only when the market prior is pessimistic and is always positively biased; this bias decreases as investors' inspection cost decreases. In contrast, a well-aligned manager's system is fully revealing when investors' inspection cost is high, and is counter-cyclical to the market belief when the inspection cost is low: It is positively (negatively) biased when the market belief is pessimistic (optimistic). Furthermore, I explore the extent to which the results generalize to a case with managerial manipulation and discuss the implications for investment efficiency. Overall, the analysis describes the complex interactions among determinants of firm disclosures and governance, and offers explanations for the mixed empirical results in this area.