When foraging for information, users face a tradeoff between the accuracy and value of the acquired information and the time spent collecting it, a problem which also surfaces when seeking answers to a question posed to a large community. We empirically study how people behave when facing these conflicting objectives using data from Yahoo Answers, a community driven question-and-answer site. We first study how users behave when trying to maximize the amount of acquired information while minimizing the waiting time. We find that users are willing to wait longer for an additional answer if they have received a small number of answers. We then assume that users make a sequence of decisions, deciding to wait for an additional answer as long as the quality of the current answer exceeds some threshold. The resulting probability di 494 stribution for the number of answers that a question gets is an inverse Gaussian, a fact that is validated by our data.

We study specific nonlinear transformations of the Black-Scholes implied volatility to show remarkable properties of the volatility surface. Model-free bounds on the implied volatility skew are given. Pricing formulas for the European options which are written in terms of the implied volatility are given. In particular, we prove elegant formulas for the fair strikes of the variance swap and the gamma swap.

We go through the many considerations involved in fitting a model to data, using as an example the fit of a straight line to a set of points in a two-dimensional plane. Standard weighted least-squares fitting is only appropriate when there is a dimension along which the data points have negligible uncertainties, and another along which all the uncertainties can be described by Gaussians of known variance; these conditions are rarely met in practice. We consider cases of general, heterogeneous, and arbitrarily covariant two-dimensional uncertainties, and situations in which there are bad data (large outliers), unknown uncertainties, and unknown but expected intrinsic scatter in the linear relationship being fit. Above all we emphasize the importance of having a "generative model" for the data, even an approximate one. Once there is a generative model, the subsequent fitting is non-arbitrary because the model permits direct computation of the likelihood of the parameters or the posterior probability distribution. Construction of a pos 53d terior probability distribution is indispensible if there are "nuisance parameters" to marginalize away.

This paper presents an experimentally grounded model on the relevance of partner selection for the emergence of trust and cooperation among individuals. By combining experimental evidence and network simulation, our model investigates the link of interaction outcome and social structure formation and shows that dynamic networks lead to positive outcomes when cooperators have the capability of creating more links and isolating free-riders. By emphasizing the self-reinforcing dynamics of interaction outcome and structure formation, our results cast the argument about the relevance of interaction continuity for cooperation in new light and provide insights to guide the design of new lab experiments.

One of the virtues of peer review is that it provides a self-regulating selection mechanism for scientific work, papers and projects. Peer review as a selection mechanism is hard to evaluate in terms of its efficiency. Serious efforts to understand its strengths and weaknesses have not yet lead to clear answers. In theory peer review works if the involved parties (editors and referees) conform to a set of requirements, such as love for high quality science, objectiveness, and absence of biases, nepotism, friend and clique networks, selfishness, etc. If these requirements are violated, what is the effect on the selection of high quality work? We study this question with a simple agent based model. In particular we are interested in the effects of rational referees, who might not have any incentive to see high quality work other than their own published or promoted. We find that a small fraction of incorrect (selfish or rational) referees can drastically reduce the quality of the published (accepted) scientific standard. We quantify the fraction for which peer review will no longer select better than pure chance. Decline of quality of accepted scientific work is shown as a function of the fraction of rational and unquali 542 fied referees. We show how a simple quality-increasing policy of e.g. a journal can lead to a loss in overall scientific quality, and how mutual support-networks of authors and referees deteriorate the system.