tag:blogger.com,1999:blog-706772597530050449.post2722808046747539579..comments2024-02-19T12:04:56.080-05:00Comments on Reading the Markets: “Fuzzy” option spreadsBrenda Jubinhttp://www.blogger.com/profile/02587551531260863509noreply@blogger.comBlogger1125tag:blogger.com,1999:blog-706772597530050449.post-2159276272118816702010-05-16T08:37:02.900-04:002010-05-16T08:37:02.900-04:00Ha! Very interesting... got me thinking about an e...Ha! Very interesting... got me thinking about an economics paper that claimed to improve upon the "rational agent" assumption. Basically, the dominant paradigm in designing economic models is to assume that people are utility maximizers (in an absolute sense). The authors argued that people seek a minimum level of utility (food, job, etc.) and after that minimum they seek to maximize their utility relative to other people.<br /><br /> Or put more plainly, after we meet our basic needs we want higher social status. Obvious, yes, but this is pretty good for economists. They go on to claim that this explains stock market momentum and bubbles, et cetera, but their proof involved industrial strength maths so I can't verify it.<br /><br /> Anyway, perhaps the fuzzy height function could be improved using their "insight"... the height of the person judging the other person's tallness would be a factor in the equation, although the minimum and maximum would still hold, as the judge would be well aware of average height and average opinion, regardless of their own tallness or shortness.Joshhttps://www.blogger.com/profile/10241276842886529712noreply@blogger.com