SIMPLE QUANTITATIVE TOOLS

true and false money assignments. From different

scenarios feed-back results an ethical question

ABSTRACT
Starting with Clarke and Groves incentivecompatible mechanism for three Big Investors (State
departments) involved in building an Amusing Park.
The paper illustrate how combination of simple
quantitative methods reveals hidden scenarios.
The first part of this paper deals with true and false
money assignments, the second part deals with
small investors where the data they used are
resulting from a payoff matrix proportional with the
data of Big Investors investments (big monetary
units, b.m.u.) in projects, in the third part it is
shown what is happen if one Big Investor lies.
The paper content also has results and comments of
an original algorithm of factorial experiments and
Informational Statistics combination, adding more
information to find strong, weak, hidden, false or
illusory relationships between true and false
promises.
Keywords Informational Statistics, Factorial
Experiments 2^3, Preferences for public goods, Pure
values, Potential relationships.
INTRODUCTION
Three Big Investors (State departments) are
involved in building an Amusing Park, Dracula
Land, in Water facilities (W), Energy (E),
Construction (C). Dracula Land might be located at
Bran, Sighisoara or Snagov.
The combination of simple quantitative methods can
reveals hidden scenarios. The three projects are
discussed and in each is implied a different Big
Investor but the projects needs money for all three
to be realized. The first part of this paper deals with

appear: it is good to lie? Because using only

arithmetic calculus and knowing the rules some
players could win more, as it is shown and
exemplified.
We are dealing with small investors where the data
they used are resulting from a payoffs matrix
identical (for the KISS principle, keep it simple
simple) with the data of Big Investors investments
in projects. The feed-before information for a small
investor is that the sum of money he wanted to win
after a certain period of time agreed by a contract to
be ten monetary units (10 u.m.) no matter what
project is made (risk avoiding). He compute the
pure values, values that pay one u.m. in case of it is
realized the project (state) for which it was created
at the end of a determined period and zero if it is
realized. The small investor wants to win no matter
what project is made same sum of money so he buy
all the states-projects. The sum of pure values is
less than 1 so the differences are the gains.
If one Big Investor lies, two situations happen:
1) Big Investors remain with more money,
some hidden or even more if they lie
(announcing less money to invest) even if
they must pay penalties;
2) Small investors paying the same sum of
money win and receive less and less and the
risk is bigger if Big Investors lie (because
small ones difficulties in identifying feedbefore money information).

It is performing in the paper some old and new

algorithms as minimizing risk by minimizing data
variance or optimizing promised money covariance.
Informational Statistics is used to determine Big
Investors will to build their projects, information
sometimes tricky for small investors when the
changing minds happens in the case of Big ones.
CLARKE-GROVES TAX
FOR PUBLIC GOODS
This is the mechanism by which even self-interested
individuals are induced to reveal their true
preferences [2]. In our case, three State departments
(rows) wanted to invest in three locations for an
Amusing Park (Dracula Land in Romania). We are
using only arithmetic calculus and knowing the
rules some players could win more, as it is shown
and below exemplified, in the next tables.
Table 1 initial discussion, big State investors
Dracula Land Initial discussion
Big investors
Bran
Sighisoara Snagov
Water
50
20
10
Energy
10
60
20
Construction
40
10
55
Chosen
100
90
85

Big investors are in Water facilities (W), Energy

(E), Construction (C). If W is out of
combination, his net profit is 15 and Dracula
Land could be at Snagov by association E with
C.
Table 2 without W, E or C
Dracula Land
E+C
W+C
W+E

Bran
50
90
60

Sighisoara
70
30
80

Snagov
75
65
30

If E is out of combination, it is not punished

and Dracula Land could be at Bran by
association of C with W. If C is out of
combination, its net profit is 10 and Dracula
Land could be at Sighisoara by W in association
with E.
Table 3 penalty, savings and gains
on profit

Penalty

Savings

gains

Water
Energy
Construction

25
0
20

40

15

30

10

The explanation is following here: initially the total

attracted value is 100 for Bran Castle location.
The Department of Water values option for three
locations are 50, 20, 10. Without this department,
the total value of remaining money for the three
locations are 50, 70, 75 respectively. Thus option
Snagov will be chosen. Since the Water intention
changes the outcome from option Bran to Snagov,
the Clarke-Groves tax will be 75-50=25. If Snagov
is chosen, Water dept. gets a benefit of 10 monetary
units. By revealing its preferences, Water sees that
option Bran is chosen. Water dept. increase in
benefit is 40. The net benefit after tax is 40-25 = 15.
If Energy is out of business, its intention does not
change the outcome and it pays no tax.
Without C, the total values for options are 60, 80,
30. Thus, option Sighisoara will be chosen. Since C
intention of retreat changes the outcome from
location Bran to Sighisoara, C's tax is 80-60=20.
The benefit to C from this retreat is 40-10=30. The
net benefit after tax is 30-20=10.
Small investors used data resulting from a winnings
matrix identical of Big Investors investments in
projects.. He compute the pure values, values that
pay one u.m. in case of it is realized the project
(state) for which it was created at the end of a
determined period and zero if it is not realized.
Calculation of pure values is presented in table 4
Table 4 Payoffs for 10 u.m. based on table 1 data
Bran
50
10
40
Matrix 3X3

Sighisoara
20
60
10
Last line is =

Snagov
10
20
55
column sum

matrix inverse summed by column (suggesting)

2.26
0.18
-1.68
0.76

-0.73
1.72
0.22
1.21

-0.15
-0.66
2.04
1.23

- and rows, giving pure values

0.138
0.124

7.2 times
8.1 times

0.058
0.321

- rows summation, pure values

17.1 times
3.1 times

To illustrate, MINV is10 times bigger. The Sum on

column values suggest avoiding risk, same value to
win if buying payoffs proportionally.
We present below (table 5, table 6, table 7, table 8)
the same algorithm for the case: The white lie of
Construction, not interested in Bran, less money
for Bran (-30), Water Sighisoara (-10)
Table 5 Construction, not interested in Bran
Big investors
Bran
Sighisoara Snagov
Water
50
10
10
Energy
10
60
20
Construction
10
10
55
Chosen
70
80
85

Table 6 without W, E or C, based on table 5 data

Dracula Land
E+C
W+C
W+E

Bran
20
60
60

Sighisoara
70
20
70

Snagov
75
65
30

penalty
0
0
20

Table 9 Construction, not interested in Snagov

Big investors
Bran
Sighisoara Snagov
Water
50
10
10
Energy
10
61
19
Construction
40
10
20
Chosen
100
80
85

Table 10 without W, E or C, based on table 9 data

Dracula Land
E+C
W+C
W+E

Bran
50
90
60

Sighisoara
71
30
81

Snagov
39
30
29

Table 11 penalty, savings and gains, C lie (-35)

Table 7 penalty, savings and gains, C lie

on profit
Water
Energy
Construction

0.1544
6.5 times
0.096
10.5 times
0.137
7.3 times
0.387
2.6 times
We present in table 9, table 10, table 11, table 12
the algorithm for the case: The big lie of
Construction, no Dracula Land in Snagov (-35),
but for Bran Castle, Yes.

savings

gains

lie
+ 10

45

+30

on profit
Water
Energy
Construction

penalty
21
0
20

savings
30

gains
9

lie

30

35 + 10

+ 40

NO SNAGOV BUT BRAN CASTLE AND A

LOT OF MONEY!

Calculation of pure values based on table 5 data is

presented in table 8

Calculation of pure values based on table 9 data is

presented in table 12

Table 8 - Payoffs for 10 u.m. based on table 5 data

Table 12 - Payoffs for 10 u.m. based on table 9 data

BRAN CASTEL NO, SNAGOV YES!

Bran
50
10
10
Matrix 3X3

Sighisoara
10
60
10
Last line is =

Snagov
10
20
55
column sum

matrix inverse with columns summation and

2.12
-0.24
-1.34
1.54

-0.31
1.81
-0.27
1.23

-0.27
-0.61
1.98
1.09

Bran
50
10
40
Matrix 3X3

Sighisoara
20
61
10
Last line is =

Snagov
10
19
20
column sum

matrix inverse with columns summation and

2.62
1.42
-5.95
-1.91

-0.76
1.53
0.76
1.53

-0.59
-2.16
7.25
4.50

- rows summation, pure values

0.127
0.079
0.206
0.412

7.9 times
12.7 times
4.9 times
2.4 times

-2.80
1.80

2.00
3.00

1.60
0.40

- rows summation, pure values

0.040
0.400
0.080
0.520

25.0 times
2.5 times
12.5 times
1.9 times

We present below (table 13, table 14, table 15, table

16) algorithm for the case: The big lies of Water
and Energy, less money for Bran (-20) and
Sighisoara (-40)

We present in table 17, table 18, table 19, table 20

the algorithm for the case: The big lies of all of
them, less money for Bran (-20), Sighisoara (-40),
Snagov (-35)

Table 13 Water and Energy, less money for Bran

and Sighisoara
Big investors
Bran
Sighisoara Snagov
Water
30
20
10
Energy
10
20
20
Construction
40
10
55
Chosen
80
50
85

Table 17 Construction, not interested in Snagov

Big investors
Bran
Sighisoara Snagov
Water
30
10
10
Energy
10
20
20
Construction
20
10
20
Chosen
60
40
50

Table 14 without W, E or C, based on table 13 data

Table 18 without W, E or C, based on table 17 data

Dracula Land
E+C
W+C
W+E

Bran
50
70
40

Sighisoara
70
30
40

Snagov
75
65
30

Table 15 penalty, savings and gains, W, E lies

on profit
Water
Energy
Construction

penalty
0
5

savings

gains

10

Persuation on Bran 10 15
Persuation on Sighisoara
10
45

lie
+ 20
= 5+40

5
35

Dracula Land
E+C
W+C
W+E

Bran
30
50
40

Sighisoara
30
20
30

Snagov
40
30
30

Table 19 penalty, savings and gains, all lies

on profit
Water
Energy
Construction

penalty
30
0
0

savings
20

gains
10

lies
+ 30
+ 40
+ 55

NO SIGHISOARA, BUT BRAN AND MONEY

FOR CONSTRUCTION

Calculation of pure values based on table 13 data is

presented in table 16

Calculation of pure values based on table 17 data is

presented in table 20

Table 16 - Payoffs for 10 u.m. based on table 13

Table 20 - Payoffs for 10 u.m. based on table 17

Bran
30
10
40
Matrix 3X3

Sighisoara
20
20
10
Last line is =

Snagov
10
20
55
column sum

matrix inverse with columns summation and

3.60
1.00

-4.00
5.00

0.80
-2.00

Bran
30
10
20
Matrix 3X3

Sighisoara
10
20
10
Last line is =

Snagov
10
20
20
column sum

matrix inverse with columns summation and

4.00
4.00
-6.00

-2.00
8.00
-2.00

0.00
-10.00
10.00

2.00

4.00

0.00

- rows summation, pure values

0.200
0.200
0.200
0.600

5.0 times
5.0 times
5.0 times
1.7 times

Some conclusions: If W is out of combination,

the net profit is 15 b.m.u and Dracula Land

could be at Bran by association with C. If E is
out of combination, it is not punished and
Dracula Land could be at Sighisoara by
association with W. If C is out of combination,
the net profit is 10 b.m.u. and Dracula Land
could be at Snagov by association with E.
If they lie, the projects has less money to invest
and may be poor quality.
Analytically the generalization of the standard,
timeless, microeconomics analysis under
certainty to a multiperiod economy under
uncertainty with securities markets is facilitated
by the concept of pure security. A pure or
primitive security is defined as a security that
pays $1 at the end of the period if a given state
occurs and nothing if any other state occurs.
The concept of the pure security allows the
logical decomposition of market securities into
portfolios of pure securities. Thus every market
security may be considered a combination of
various pure securities [1].
Our small investor is one of risk-avoiding
temperament and want invest 10 monetary units
(m.u.) and win the same sum of money no
matter what location finally will be chosen.
Following our scenarios he could receive one
m.u. if he pays initially 0,32 m.u. (see Table 4,
two times more) but following the process, only
0,4 m.u., paying 0,6 m.u. for receiving one (see
Table 20). If he is a risk-taking and chose
Dracula Land as made nearby the Bran Castle at
the end of an agreed period the payment will be
5 times more if the investment is for W
facilities, two times for Sighisoara, payee, the
same W and the investor receive the money
back if the construction of Dracula Land is
made in Snagov Park. If he wanted to know
how much value is into one b.m.u. invested by

W, his 10 m.u. contains 50 b.m.u multiplied by

Bran pure value is o,138 + 20 b.m.u. multiplied
by Sighisoara pure value, o,124 + 10 b.m.u.
multiplied by Snagov pure value, o,058.
If the investment is made for Energy facilities,
the small investor could receive six times more
if he invest in Sighisoara, two times for Snagov
and receive money back if the Dracula Land is
build at Bran Castel. It is a very attractive
wining matrix if the agreed period for repaying
is short enough. Chances are ever better for
investing in Construction facilities with two
possibilities to win four times and 5,5
respectively. But our investor is risk avoiding
so he prefers the same sum, quite small.
FACTORIAL EXPERIMENTS APPLICATION

The paper content also has an original

algorithm of experimental simulation adding
more information to factorial experiments
application and find strong, weak, hidden, false
or illusory relationships between true and false
promises.
Table 21 - Investments based on table 1and table 9
A
investors

Dracula
Land
Sighisoara

B
Snagov

Grand
Total

Energy
construction
Total TRUE
Energy
construction
Total C-lies
Grand Total

6o
10
70
61
10
71
141

20
55
75
19
20
39
114

80
65
145
80
30
110
255

ITEM
investors
Dr Land
Assertion
investors
investors
Dr Land
investors
Energy
Energy

alternative
Energy
Sighisoara
it is ok
Energy
Dr Land
Sighisoara
Energy
Assertion
cons lies
Snagov
Assertion
it is ok
Assertio
n
Dracula Land
it is ok
Sighisoara
cons lies Sighisoara

have laid claim. What, for example, is a

relationship? Where is it found? How and When
does it occur? And why? Finally, what purpose does
the investigation of such a nebulous concept serve?
Classifying relationships challenges the
imagination and exhausts the challenger.
Relationships are political, economic and social or
literally, existing without number in the
environment. On the other hand, they can be
physical
or
metaphysical,
predictable
or
unpredictable, good or bad, progressing or
regressing, mundane or crucial, or just plain
ornery. We will search for meaningful relationship
in the jungle of semistructured Matrix, with only
defining attributes as our flimsy snare.

No matter of lies, the existing relationship

shows Sighisoara as location. There is no
relation between location and truth/lie
assertions, but introducing the third variable,
investors, it result that if C is a fair player the
location could be Snagov.
In conclusion it is shown how measuring
informational gains of a triad of attributes by
Informational Statistics we could find positive
and negative interactions and the potential
informational change helping to build new
scenarios.
Table 22 Informational Statistics results
Quantity of subtle information received
A from C
A from B
A int BC
30,3%
80,2%
81,3%
B from A
B from C
B int AC
96,1%
68,0%
96,3%
C from A
C from B
C int AB
58,4%
52,8%
67,2%
INTERACTION
investors

Assertion

Dracula Land

FALSE,ILLUSIVE

Same structure

Sighisoara

0%

RELATION

weak distorsion

Snagov

4%

weak
distorsion
s

info.gain

POTENTIAL

Assertion

investors

Dracula Land

info.gain

FALSE,ILLUSIVE

same structure

Sighisoara

0%

RELATION

weak distorsion

Snagov

4%
Dracula Land

3%

no infogain

RELATION
RELATION

A=

Investors

26%

powerful

#
Informational
adjusted =

0,532
6%

ENERGY
just a hint of information

The operative word in analyzing the DATA is

relationship. The relationship concept, albeit
simplicity itself, has tested any manner of
perspicacity to which many authors may previously

In the first part of this paper it was shown how

if one Big Investor lies, two situations happen:
1) Big Investors remain with more money, some
hidden or even more if they lie announcing less
money to invest) and quite if they must pay
penalties and they are not constructing;
2) Small investors paying the same sum of
money win and receive less and less and the
risk is bigger if Big Investors lie (because small
ones difficulties in identifying feed-before
information).
It is performing in the paper some old and
new algorithms as minimizing risk by
minimizing data variance or optimizing
promised money covariance. Informational
Statistics is used to determine Big Investors will
to build their projects, information sometimes
tricky for small investors when the changing
minds happens in the case of Big ones.
In the end the paper shows results obtained by
using an original Informational Statistics
algorithm of experimental simulation adding
more information to factorial experiments
application and find strong, weak, hidden, false
or illusory relationships between processes.
Finally, the article is devoted to one of
interesting quantitative methods which is used
in microeconomics. The original algorithm
takes more information to factorial experiments
application and find the relationship between

true and false promises more accurately.

References
[1]

[2]

[3]

Copeland, E., Thomas, Weston, J., Fred,

Financial Theory and Corporate Policy, page
113, Third Edition, Addison-Wesley Publishing
Co., 1988, ISBN 0-201-10648-5.
Maddala, G. S, Miller Ellen, (1989).
Microeconomics: theory and applications,
Chapter 19, Externalities and Government
Intervention, page 549, ISBN 0-07-039415-6.
Mihaita, Niculae (2003). Relations statistiques
fortes, caches, fausses et illusoires: applications
de la statistique informationelle, Editura ASE,
ISBN
973-594-339,
editura@net.ase.ro
http://www.ase.ro/biblioteca/digitala,
http://ase.academia.edu/NiculaeMihaita