We examine an Outside Option Game in which player I submits a claim for a share of a cake while player II simultaneously either makes a claim or chooses to opt out. If player II opts out, then she receives an opt-out payment while player I receives nothing. If player II opts in and if the claims...

This paper develops an approach to equilibrium selection in game theory based on studying the equilibriating process through which equilibrium is achieved. The differential equations derived from models of interactive learning typically have stationary states that are not isolated. Instead, Nash...

A persistent argument against the transitivity assumption of rational choice theory postulates a repeatable action that generates a significant benefit at the expense of a negligible cost. No matter how many times the action has been taken, it therefore seems reasonable for a decision-maker to...

Experimental results on the Ellsberg paradox typically reveal behavior that is commonly interpreted as ambiguity aversion. The experiments reported in the current paper find the objective probabilities for drawing a red ball that make subjects indifferent between various risky and uncertain...

We use probability-matching variations on Ellsberg’s single-urn experiment to assess three questions: (1) How sensitive are ambiguity attitudes to changes from a gain to a loss frame? (2) How sensitive are ambiguity attitudes to making ambiguity easier to recognize? (3) What is the relation...

This paper reviews the part played by economists in organizing the British third-generation mobile-phone licence auction that concluded on 27 April 2000. It raised 22.5 billion pounds ($34 billion or 2.5% of GNP) and was widely described at the time as the biggest auction ever.We discuss the...

The conventional wisdom that mobile operators are able to act as monopolists in pricing call termination on their networks has recently been challenged by Hutchison 3G's entry into European mobile markets. The European Commission's electronic communications regime allows national regulatory...