This paper develops a simple signaling model whereby high valuation firm uses levels of investment, debt and dividends to convey information to the market regarding its valuation. Conditions are determined under which investment, debt and dividends are employed in a separating Nash equilibrium....

Even when participants know very little about their environment, the market, itself, by serving as a selection process of information, promotes an efficient aggregate outcome. To emphasize the role of the market and the importance of natural selection, rather than the strategic actions of...

We perform an asset market experiment in order to test the central result coming from the new overconfidence models, namely that high levels of overconfidence lead to enhanced trading activity. We find that overconfidence does engender additional trade. Unlike previous experimental or...

While the literature usually justifies informational efficiency in the context of rationality, this paper shows informational efficiency by applying the evolutionary idea of natural selection. In a dynamic futures market, speculators are assumed to merely act upon their predetermined trading...

1. Evolution, Irrationality and Perfectly Competitive Equilibrium -- 2. Evolution, Irrationality and Monopolistically Competitive Equilibrium -- 3. Evolution and Informationally Efficient Equilibrium in a Commodity Futures Market -- 4. Natural Selection, Random Shocks and Market Efficiency in a...

One of the core building blocks of traditional economic theory is the concept of equilibrium, a state of the world in which economic forces are balanced and in the absence of external influences the values of economic variables remain static. Many traditional equilibrium models, or equilibria,...

This paper uses an evolutionary approach to explain the origin of money as media of exchange in a primitive economy, where agents specialize in production for the purpose of trading for their own consumption goods. A general class of dynamics, which is consistent with Darwinian dynamics, is...

Profit maximization is the usual prerequisite for achievement of a perfectly competitive equilibrium. However, for a long time it has been thought that this principle of profit maximization can be replaced by natural selection. This paper shows analytically that with the market selection...

This article begins by proposing a random taste parameterization of a quadratic extension of the PIGLOG demand system at the household level, which is consistent with exact aggregation. This variation in tastes is a random function of household characteristics. The econometric implication is...

Chapter 1 Introduction -- Chapter 2 Conservatism bias and asset price overreaction or underreaction to new information in a competitive securities market -- Chapter 3 Conservatism bias and asset price overreaction or underreaction to new information in the presence of strategic interaction --...