Econophysics and individual choice

Robert F. Bordley

Physica A: Statistical Mechanics and its Applications, 2005, vol. 354, issue C, 479-495

Abstract: The subjectivist theory of probability specifies certain axioms of rationality which together lead to both a theory of probability and a theory of preference. The theory of probability is used throughout the sciences while the theory of preferences is used in economics. Results in quantum physics challenge the adequacy of the subjectivist theory of probability. As we show, answering this challenge requires modifying an Archimedean axiom in the subjectivist theory. But changing this axiom modifies the subjectivist theory of preference and therefore has implications for economics. As this paper notes, these implications are consistent with current empirical findings in psychology and economics. As we show, these results also have implications for pricing in securities markets.

Keywords: Econophysics; Probability amplitude mechanics; Probability theory (search for similar items in EconPapers)
Date: 2005
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Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:phsmap:v:354:y:2005:i:c:p:479-495

DOI: 10.1016/j.physa.2005.03.016

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