Experimental studies show that the Nash equilibrium and its refinements are poor predictors of behavior in non-cooperative strategic games. Cooperation models, such as ERC and inequality aversion, yield superior predictions compared to the standard game theory predictions. However, those models...

We propose an epistemic theory of micro-economic interactions, termed Economic Harmony. In the theory, we modify the standard utility, by changing its argument from the player’s actual payoff, to the ratio between the player’s actual payoff and his or her aspired payoff. We show that the...