A Bayesian model of game decomposition

Abstract

In this paper, we propose a Bayesian probabilistic model to describe collective behavior generated by a finite number of agents competing for limited resources. In this model, the strategy for each agent is a binary choice in the Minority Game and it can be modeled by a Binomial distribution with a Beta prior. The strategy of an agent can be learned given a sequence of historical choices by using Bayesian inference. Aggregated micro-level choices constitute the observable time series data in macro-level, therefore, this can be regarded as a machine learning model for time series prediction. To verify the effectiveness of the new model, we conduct a series of experiments on artificial data and real-world stock price data. Experimental results demonstrate the new proposed model has a better performance comparing to a genetic algorithm based decomposition model.