Rational Choice Theory
> Most mainstream academic economics theories are based on rational choice theory.
> While most conventional economic theories assume rational behavior on the part of consumers and investors, behavioral finance is a field of study that substitutes the idea of “normal” people for perfectly rational ones. It allows for issues of psychology and emotion to enter the equation, understanding that these factors alter the actions of investors, and can lead to decisions that may not appear to be entirely rational or logical in nature. This can include making decisions based primarily on emotion, such as investing in a company for which the investor has positive feelings, even if financial models suggest the investment is not wise.
Bounded rationality > Relationship to behavioral economics
Perfectly rational decisions can be and are made without perfect information; bounded by the information available at the time. If we all had perfect information, there would be no entropy and no advantage; just lag and delay between credible reports and order entry.
Heed these words wisely:
What foolish games! Always breaking my heart.
> Asymmetric games also naturally model certain real-world scenarios such as automated auctions where buyers and sellers operate with different motivations. Our results give us new insights into these situations and reveal a surprisingly simple way to analyse them. While our interest is in how this theory applies to the interaction of multiple AI systems, we believe the results could also be of use in economics, evolutionary biology and empirical game theory among others.
> A Pareto improvement is a change to a different allocation that makes at least one individual or preference criterion better off without making any other individual or preference criterion worse off, given a certain initial allocation of goods among a set of individuals. An allocation is defined as "Pareto efficient" or "Pareto optimal" when no further Pareto improvements can be made, in which case we are assumed to have reached Pareto optimality.
Which, I think, brings me to equitable availability of maximum superalgo efficiency and limits of real value creation in capital and commodities markets; which'll have to be a topic for a different day.