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I've been struggling with proving a conjecture concerning order statistics of Brownian motions for a while. The conjecture I'm looking to prove is the following: (I have run Monte Carlo simulations that confirm the conjecture.)

Let $(q_1(t), …, q_n(t))$ be a vector of independent Brownian motions with $q_i(0) = 0$ for all $i$. Let $T > 0$. Each $q_i$ represents an object in a game, and each of $J < n$ players in the game can pick exactly one object $i$ at any time $t \in [0, T]$. Whenever a player picks an object, he picks the one that currently has the highest value amongst those that have not been picked before. A player's payoff is the value of the object at the time he picks it. Let $x_j(t_j; t_1, …, t_{j-1})$ denote the expected payoff (expectation taken at time 0) from picking at time $t_j$, given that players $1, …, j-1$ will pick at times $t_1, …, t_{j-1}$. I want to show that $x_j(t_j; t_1, …, t_{j-1})$ is decreasing in $t_1, …, t_{j-1}$.

I will need this for an economic theory paper I'm writing, and would be very grateful for any help!

Some things that I already thought through:

  • I have already shown that $x_j(t_j; t_1, …, t_{j-1})$ is increasing in $t$ and jointly continuous in all arguments.
  • The case $j=2$ is quite tractable, and for the case $j = 3$ I have the intuition on how to prove it. That intuition, however, doesn't extend to the general case.
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The strategy of the other $n-1$ players can be viewed as a single adversary trying to minimize the payoff of the $n$th player. Picking the highest unpicked object is optimal for that adversary by coupling.

If $t_{i-1} \le t_i' \lt t_i$ then picking at time $t_i'$ instead of $t_i$ does an imperfect job of choosing the unpicked object which will be highest at time $t_i$. You can view picking at $t_i'$ as sometimes playing optimally at time $t_i$, and sometimes choosing a lower object at time $t_i$.

If you want to consider decreasing $t_i'$ past $t_{i-1}$ then you can view this as decreasing $t_i'$ to $t_{i-1}$, then replacing $t_{i-1}$ with a smaller $t_{i-1}'$.

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  • $\begingroup$ Thanks a lot! However, either I misunderstand your reply, or you misunderstood my question. I'm interested the payoff to player $j$ holding fixed $t_j$, but varying $t_1, …, t_{j-1}$. (I'm only interested in the case $t_1\leq…\leq t_j$.) In case I misunderstood your reply, then it's probably the first two lines. $\endgroup$ – Sandro Jul 19 '14 at 6:07
  • $\begingroup$ @Sandro: I assumed $j=n$ because later players don't affect player $j$ so we might as well assume player $j$ is the last player. What don't you understand about the first two lines of my answer? $\endgroup$ – Douglas Zare Jul 19 '14 at 6:26
  • $\begingroup$ You use $i$ and $j$ interchangeably, right? I guess the stumbling block is the coupling (of I know the definition, but don't have experience with). Also, I'm not sure whether $j=n$ is w.l.o.g. (but that might be because I don't yet quite understand your proof.) If $j=n$ then any gain to the adversary is a loss to player $j$. If $j<n$, then a gain to the adversary can also be due to him picking the player who will be ranked second-to-worst rather than worst at $t_j$, which will not decrease player $j$'s payoff. $\endgroup$ – Sandro Jul 19 '14 at 7:59
  • $\begingroup$ @Sandro: No, I don't use $i$ and $j$ interchangeably. $i$ is an index of an opponent's choice. $\endgroup$ – Douglas Zare Jul 19 '14 at 9:12
  • $\begingroup$ Could you say which BMs you couple, and what coupling you choose? $\endgroup$ – Sandro Jul 19 '14 at 19:22

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