The Santa Fe Institute’s economics program has nurtured some of the discipline’s most highly innovative forml theorizing and interdisciplinary brainstorming since its inception in the late 1980s. This proceedings volume provides the occasion for a review of ten-year’s progress by researchers associated with the Institute. The initial programmatic proposals of the first volume have indeed ben fl...

This paper provides a framework for discussing the empirical validation of computer simulation models of market phenomena. It considers first a simulation model of a market of competing coffee brands to ask some questions about the purposes and practices of simulation modeling. It defines functional complexity and derives measures of this for Schelling’s Segregation model. It refers to the Ener...

We describe a two factor valuation model for convertible bonds when the firm may default. We endogenize both default and the recovery value of a defaulted bond. A sophisticated numerical framework enables us to specify numerically and financially consistent boundary conditions and inequality constraints. We investigate the affect of changing the default, recovery and loss specification. The aff...

We consider financial contracts that are tradable in any quantities at fixed prices. A bundle of such contracts constitutes an arbitrage if it offers non-negative payoff in any future state, but commands negative present cost. This article brings together fairly recent results on how to find an arbitrage provided some exists. Otherwise, a state-contingent, non-profit price vector will be identi...

Using a computational testbed, we theoretically predict and experimentally show that in the minimum effort coordination game, as the cost of effort increases, 1) the game converges to lower effort levels, 2) the convergence speed increases, and 3) the average payoff is not monotonically decreasing. In fact, the average profit is an U-shaped curve as a function of cost. Therefore, contrary to th...

In this paper, I show how to use the generalized Schur form to solve a system of linear expectational di!erence equations (a multivariate linear rational expectations model). The method is simple to understand and to use, and is applicable to a large class of rational expectations models. The only hard part is taken care of by just two standard algorithms, both of which are available as freewar...

This paper proves two theorems for homogeneous juries that arise from different solutions to the problem of aggregation of dichotomous choice. In the first theorem, negative correlation increases the competence of the jury, while positive correlation has the opposite effect. An enlargement of the jury with positive correlation can be detrimental up to a certain size, beyond which it becomes ben...

In this paper we present an original model of sequential problem choice within scientific communities. Disciplinary knowledge is accumulated in the form of a growing tree-like web of research areas. Knowledge production is sequential since the problems addressed generate new problems that may in turn be handled. This model allows us to study how the reward system in science influences the scien...

This pa per suggests a simple method based on Chebyshev approximation at Chebyshev nodes to approximate partial differential equations. The methodology simply consists in determining the value function by using a set of nodes and basis functions. We provide two examples. Pricing an European option and determining the best policy for chatting down a machinery. The suggested method is flexible, e...

This article presents a novel computational approach to solving models with both uninsurable idiosyncratic and aggregate risk that uses projection methods, simulation and perturbation. The approach is shown to be both as efficient and as accurate as existing methods on a model based on Krusell and Smith (1998), for which prior solutions exist. The approach has the advantage of extending straigh...