We compare short rate diffusion models with respect to their implications for term structure movements, the plausiblity of which serves us as a criterion for evaluating the models. Analytically for Gauss-Markov models and numerically for a broader collection of models prevalent in the...

In an epistemic framework due to Aumann we characterize the condition on the rationality of the players that is both necessary and sufficient to imply backward induction in perfect information games in agent form. This condition requires each player to know that the players are rational at...

This paper reports on RatDemo, an example program for the application of RatImage, the Research Assistance Toolbox for computerized human behavior experiments. The complete source code of this short experiment program is listed and briefly discussed. Since RatDemo combines several central...

The paper presents an expository account of several experimentally based descriptive theories of cooperation in interactive decision situations. First the equity principle (Selten 1988), prominence in the decimal system (Albers and Albers 1983), and the difference measure of predictive success...

Recent theoretical and empirical research in international macroeconomics has rediscovered the problem of purchasing power parity (PPP). Empirically, PPP is a bad approximation of both the short-term and medium-term properties of the data. Economists have had difficulties in explaining the...

Let X be a seminmartingale and Teta the space of all predictable X-integrable processes teta such that integral tetat dX is inthe space S square of semimartingales. We consider the problem of approximating a given random variable H element of L square (P) by the sum of a constant c and a...

This paper reassesses the long-run relation between nominal interest rates and inflation using German data. It shows that the empirical rejection of the strict Fisher effect in previous studies, i.e., the finding of interest rates not fully adjusting to changes in inflation, can be attributed to...

This paper reports on RatImage, version 3.30. The extended features are presented. RatImage 3.30 is fully downward compatible to the first published version of the Research Assistance Toolbox for Computer-Aided Human Behaivor experiments, RatImage 3.10. This paper is an addendum to the manula of...

In this paper we present a new methodology for modelling the development of the prices of defaultable zero coupon bonds that is inspired by the Heath-Jarrow-Morton (HJM) approach to risk-free interest rate modelling. Instead of precisely specifying the mechanism that triggers the default we...

We examine an evolutionary model in which the primary source of "noise" that moves the model between equilibria is not random, arbitrarily improbable mutations but mistakes in learning. We find conditions under which the payoff-dominant equilibrium in a 2x2 game is selected by the model as well...