Computational exploration of the biological basis of Black-Scholes expected utility function

It has often been argued that there exists an underlying biological basis of utility functions. Taking this line of argument a step further in this paper, we have aimed to computationally demonstrate the biological basis of the Black-Scholes functional form as applied to classical option pricing and hedging theory. The evolutionary optimality of the classical Black-Scholes function has been computationally established by means of a haploid genetic algorithm model. The objective was to minimize the dynamic hedging error for a portfolio of assets that is built to replicate the payoff from a European multi-asset option. The functional form that is seen to evolve over successive generations which best attains this optimization objective is the classical Black-Scholes function extended to a multiasset scenario.

The impact of court delays on the prosecutor and the defendant: an economic analysis

One important aspect of the economic theory of criminal court delay is to understand how the prosecutor and the defendant make their decisions, and how these respond to changes in trial delay. If both parties jointly maximise expected utility, trial delay may increase or decrease the number of trials, depending upon the decision makers' attitudes towards risk. The main policy implication is that providing the criminal courts with more resources in the form of additional judges and court capacity may lengthen the trial queue rather than shorten it. This is a counterintuitive result contrary to popular belief.

Insurance services in multi-agent systems

In a multi-agent environment, there is often the need for an agent to cooperate with others so as to ensure that a given task is achieved timely and cost-effectively. Present agent systems currently maximizes this through mechanisms such as trust and risk assessments. In this paper, we extend this mechanism by introducing the concept of insurance, in which the insurance agents act as a bridge between agents who require resources from others. Unlike traditional systems, agents purchase insurance so as to guarantee to have the requested resources during the task execution time and thus minimize the risk in task failure. The novelty of this proposal is that it ensures agents continuously to exchange resources and to seek maximum expected utility in a dynamic environment at the same time. Our experimental results confirm the feasibility of our approach.

Integrating insurance services, trust and risk mechanisms into multi-agent systems

In multi-agent systems, there is often the need for an agent to cooperate with others so as to ensure that a given task is achieved timely and cost effectively. Currently multi-agent systems maximize this through mechanisms such as coalition formation, trust and risk assessments, etc. In this paper, we incorporate the concept of insurance with trust and risk mechanisms in multi-agent systems. The novelty of this proposal is that it ensures continuous sharing of resources while encouraging expected utility to be maximized in a dynamic environment. Our experimental results confirm the feasibility of our approach.

The effect of store name investments on perceived store quality

This study is about store names as brand signals. It focuses on the effects of store name investments on store name credibility and perceived store quality. Using the theoretical framework of Erdem and Swait (1998), hypotheses are developed vis-à-vis the effects of store name investments on consumers’ perceived store quality. The proposed hypotheses are empirically tested on data collected from a sample of students. The study is part of a project that looks at how store name and brand name credibility affect consumers’ expected utility.

Trading in open marketplace using trust and risk

In this paper, we propose buying and selling models for agents to trade in the open multi-agent marketplace. Unlike auctions, we take into account of the fact that agents trading in such open environments has to maximize their profits and at the same time, protect themselves from fraud and deception. We attempt to address this issue by incorporating the element of trust and risk management into our proposed buying and selling model. During buying, agents learn to select their partners based on the trustworthiness of the potential partner as well as its personal risk attitude. During selling, agents learn to increase the chances of winning a deal by adjusting their profit rate, which is a measure that considers both trust and risk. The novelty of this proposal is that it ensures agents continuing to seek maximum expected utility in a dynamic trading environment. Our experimental results confirm the feasibility of our approach.

How sensitive are bargaining outcomes to changes in disagreement payoffs?

We use a human-subjects experiment to investigate how bargaining outcomes are affected by changes in bargainers’ disagreement payoffs. Subjects bargain against changing opponents, with randomly drawn asymmetric disagreement outcomes that vary over plays of the game, and with complete information about disagreement payoffs and the cake size. We find that subjects only respond about half as much as theoretically predicted to changes in their own disagreement payoff and to changes in their opponent’s disagreement payoff. This effect is observed in a standard Nash demand game and a related unstructured bargaining game, in both early and late rounds, and is robust to moderate changes in stake sizes. We show theoretically that standard models of expected utility maximisation are unable to account for this under-responsiveness, even when generalised to allow for risk aversion. We also show that quantal-response equilibrium has, at best, mixed success in characterising our results. However, a simple model of other-regarding preferences can explain our main results.

Dynamic regime marginal structural mean models for estimation of optimal dynamic treatment regimes, Part I: main content

Dynamic treatment regimes are set rules for sequential decision making based on patient covariate history. Observational studies are well suited for the investigation of the effects of dynamic treatment regimes because of the variability in treatment decisions found in them. This variability exists because different physicians make different decisions in the face of similar patient histories. In this article we describe an approach to estimate the optimal dynamic treatment regime among a set of enforceable regimes. This set is comprised by regimes defined by simple rules based on a subset of past information. The regimes in the set are indexed by a Euclidean vector. The optimal regime is the one that maximizes the expected counterfactual utility over all regimes in the set. We discuss assumptions under which it is possible to identify the optimal regime from observational longitudinal data. Murphy et al. (2001) developed efficient augmented inverse probability weighted estimators of the expected utility of one fixed regime. Our methods are based on an extension of the marginal structural mean model of Robins (1998, 1999) which incorporate the estimation ideas of Murphy et al. (2001). Our models, which we call dynamic regime marginal structural mean models, are specially suitable for estimating the optimal treatment regime in a moderately small class of enforceable regimes of interest. We consider both parametric and semiparametric dynamic regime marginal structural models. We discuss locally efficient, double-robust estimation of the model parameters and of the index of the optimal treatment regime in the set. In a companion paper in this issue of the journal we provide proofs of the main results.

The assessment of motivation for behaviour change among sex offenders against children: an investigation of the utility of the Stages of Change Questionnaire

A better understanding of motivation for behaviour change among sex offenders against children would improve treatment programmes designed to modify sexual offending behaviour. However, investigation of this issue is limited by lack of theoretically and empirically sound measures of motivation for behaviour change among sex offenders. This paper reports on two studies that were conducted to investigate the psychometric properties (validity, reliability, and social desirability) of the Stages of Change Questionnaire, adapted to measure motivation for behaviour change among sex offenders against children. In Study 1, the psychometric properties of the questionnaire were assessed for sex offenders against children (n=36) who were on a treatment waiting list. In Study 2, the psychometric properties of the questionnaire were assessed for sex offenders against children (n=47) at pre-treatment, mid-treatment, and post-treatment. Both studies supported the validity and reliability of the adapted Stages of Change Questionnaire, and the influence of social desirability upon responding was less than expected. The results of this investigation supported the potential utility of the Stages of Change Questionnaire as a measure of motivation for behaviour change for sex offenders against children.

Generic and diabetes-specific well-being in the AT.LANTUS follow-on study : further psychometric validation of the W-BQ28 indicates its utility in research and clinical practice in type 2 diabetes in the UK

Aims  To undertake further psychometric validation of the W-BQ28 to determine its suitability for use in adults with Type 2 diabetes in the UK using data from the AT.LANTUS follow-on study.

Methods  A total of 353 people with Type 2 diabetes participated in the AT.LANTUS Follow-on study, completing measures of well-being (W-BQ28), treatment satisfaction (DTSQ) and self-care (SCI-R). Confirmatory factor analyses was used to confirm the W-BQ28 structure and internal consistency reliability was assessed. Additional statistical tests were conducted to explore convergent, divergent and known-groups validity. Minimal important differences were calculated using distribution and anchor-based techniques.

Results  Structure of the W-BQ28 (seven four-item subscales plus 16-item generic and 12-item diabetes-specific scales) was confirmed (comparative fit index = 0.917, root mean square error of approximation (RMSEA) = 0.057). Internal consistency reliability was satisfactory (four-item subscales: alpha = 0.73–0.90; 12/16-item scales: α = 0.84–0.90). Convergent validity was supported by expected moderate to high correlations (rs = 0.35–0.67) between all W-BQ28 subscales (except Energy); divergent validity was supported by expected low to moderate correlations with treatment satisfaction (rs = −0.03–0.52) and self-care (rs = 0.02–0.22). Known-groups validity was supported with statistically significant differences by sex, age and HbA1c for expected subscales. Minimal important differences were established (range 0.14–2.90).

Conclusions  The W-BQ28 is a valid and reliable measure of generic and diabetes-specific well-being in Type 2 diabetes in the UK. Confirmation of the utility of W-BQ28 (including establishment of minimal important differences) means that its use is indicated in research and clinical practice.

The value of work in younger and older adults' lives: an Australian perspective

In the present study we examined the perceived role of work in the lives of younger and older adults in three different occupations: teaching, nursing, and small business. On the basis of lifespan developmental theory of changes in work-related values across the lifespan we expected that (1) older adults would rate their job satisfaction and organisational commitment more highly than younger adults, and (2) younger adults would rate the importance of work more highly than older workers. Based on utility theory we expected that nurses and teachers would view early retirement more positively than small business employees because of early retirement incentives in these two careers. One-hundred-sixty-two participants completed a 118-item survey. Overall few age differences were found between older and younger workers. On average, all participants rated work as moderately important and their job satisfaction as moderately high. Nonetheless, older participants rated their job satisfaction higher than younger participants. On average, all groups believed they would retire before 65 years of age. The latter finding is important for workability theory and raises issues about how to change attitudes, perceptions and values about working past traditional retirement ages.

The assessment of denial, cognitive distortions and victim empathy among pedophilic sex offenders. An evaluation of the utility of self-report measures.

The modification of denial, defensiveness, and cognitive distortions and the enhancement of victim empathy are central components in the treatment of pedophilic sex offenders (PSOs) and are thus important factors to evaluate. This review of the literature highlights three broad problems with self-report measures of these variables. First, the psychometric properties of measures vary enormously, with some having no established validity or reliability. Second, the purpose of the measure is generally quite transparent, enabling the respondent to easily pick the socially acceptable responses. Finally, it is difficult to determine which are the best measures to use in assessing PSOs. Measures range from those designed for the general public to those designed specifically for PSOs. Also, they range from those that assess broad processes (e.g., general empathy) to those that assess offensespecific variables (e.g., victim empathy). This article argues that these issues need to be addressed to improve both the assessment of these processes among PSOs and the evaluation of treatment programs for PSOs.

Utility of mitochondrial DNA sequences from four gene regions for systematic studies of Australian freshwater crayfish of the Genus Cherax (Decapoda: Parastacidae)

One of the most important requirements for systematic and phylogenetic studies is the identification of gene regions with the appropriate level of variation for the question of interest. Molecular phylogenetic and systematic studies of freshwater crayfish have made use of DNA sequences mainly from ribosomal genes, especially the 16S rRNA gene region. Thus, little information is available on other potentially useful mitochondrial gene regions for systematic studies in these animals. In this study, we look at nucleotide variation and phylogenetic relations within and between four species of freshwater crayfish of the genus Cherax from the southwest of Western Australia using four fragments amplified from the 16S rRNA, 12S rRNA, Cytochrome Oxidase I (COI), and Cytochrome b (Cyt b) gene regions. Samples of Engaeus strictifrons, Euastacus bispinosus, and Geocharax falcata were also sequenced for comparative purposes. The size of the fragments varied from 358 bp to 600 bp. Across all samples, the four fragments showed significant phylogenetic signal and showed similar proportions of variable sites (28.81–37.33%). Average divergence within species for the mitochondrial gene regions varied from 1.18% to 4.91%, with the 16S rRNA being the least variable and Cyt b the most variable. Average divergence between species ranged 7.63–15.53%, with 16S rRNA being the least variable and COI the most variable. At the generic level, average divergence ranged 17.21–23.82%. Phylogenetic analyses of the 16S rRNA, 12S rRNA, and COI regions generated four clades consistent with the presence of four species previously identified on the basis of allozyme and morphological studies. The relationships among samples were largely congruent across the data set, although some relationships remained unresolved. Not all samples could be amplified using the Cyt b primers, and some of those that were showed quite anomalous relationships, suggesting that one or more Cyt b pseudogenes were being amplified.

The utility of the trans-theoretical model of behavior change in the treatment of sex offenders

This paper discusses the use of the Trans-theoretical Model of Behavior Change in the treatment of sex offenders. Constructs within this theory are the Stages of Change, Processes of Change and Decisional Balance. The first section of this paper provides a brief description of these constructs. The second section provides a brief review of research related to these constructs and discusses the implications of this research in relation to the treatment of sex offenders. The third section of this paper provides a practical description of the use of the constructs of the Trans-theoretical Model of Behaviour Change in the treatment of sex offenders. Although the validity of this model among sex offenders requires further investigation, the Trans-theoretical Model of Behavior Change appears to have considerable utility as an overarching theoretical model to conceptualize and facilitate behavior change among sex offenders.