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Contract theory

In economics, contract theory studies how economic actors can and do construct contractual arrangements, generally in the presence of asymmetric information. Because of its connections with both agency and incentives, contract theory is often categorized within a field known as Law and economics. One prominent application of it is the design of optimal schemes of managerial compensation. In the field of economics, the first formal treatment of this topic was given by Kenneth Arrow in the 1960s. In 2016, Oliver Hart and Bengt R. Holmstrom both received the Nobel Memorial Prize in Economic S ...

Costly state verification

Costly State Verification approach in contract theory considers contract design problem in which verification of enterprise performance is costly and a lender has to pay a monitoring cost. A central result of CSV approach is that it is generally optimal to commit to a partial, state-contingent disclosure rule. Robert M. Townsend 1979 has shown that under few strong assumptions the optimal financing mechanism is a standard debt contract for which there is no disclosure of the debtors performance as long as debt as honored, but there is full disclosure verification in case of default. Viewed ...

Neural network

A neural network is a network or circuit of neurons, or in a modern sense, an artificial neural network, composed of artificial neurons or nodes. Thus a neural network is either a biological neural network, made up of real biological neurons, or an artificial neural network, for solving artificial intelligence problems. The connections of the biological neuron are modeled as weights. A positive weight reflects an excitatory connection, while negative values mean inhibitory connections. All inputs are modified by a weight and summed. This activity is referred as a linear combination. Finall ...