Book Reviews

Ben Brooks of the Becker Friedman Institute reviews “Game-Changer: Game Theory and the Art of Transforming Strategic Situations”, by David McAdams. The Econlit abstract of this book begins: “Introduces the reader to a game-theory approach to life, including business, and presents six ways to change games that people are confronted with. Discusses commitment; inviting regulation; merging or ""colluding"; enabling retaliation; building trust; leveraging relationships; how to escape the prisoners' dilemma; price comparison sites; the Newfoundland cod collapse; the real estate agency; addicts in the emergency department; eBay reputation; and antibiotic resistance. McAdams is Professor in the Fuqua School of Business at Duke University.”

Redefining the deviance objective for generalised linear models

This paper defines the ‘Case Deleted’ Deviance - a new objective function for evaluating Generalised Linear Models, and applies this to a number of practical examples in the pricing of general insurance. The paper details practical approximations to enable the efficient calculation of the objective, and derives modifications to the standard Generalised Linear Modelling algorithm to allow the derivation of scaled parameters from this measure to reduce potential over fitting to historical data. These scaled parameters improve the predictiveness of the model when applied to previously unseen data points, the most likely being related to future business written. The potential for over fitting has increased due to number of factors now used, particularly in pricing personal lines business and the advent of price comparison sites which has increased the penalties of mis-estimation. New material in this paper has been included in a UK patent application No. 1020091.3.