In an experiment, a group of strangers was randomly divided in pairs to play a prisoners’ dilemma; this process was indefinitely repeated. Cooperation did not increase when subjects could send public messages amounting to binding promises of future play.

This article develops a simple theoretical framework to show how forecasters may bias downward point predictions under the assumption that the asymmetric loss function is directly related to the (Mean) Absolute Percentage Error (M)APE.

It is standard in experimental economics to use decontextualized designs where payoff structures are presented using neutral language. Here we show that cooperation in such a neutrally framed Prisoner’s Dilemma is equivalent to a PD framed as contributing to a cooperative endeavour....

We prove a relationship between the bordered Hessian in an equality constrained extremum problem and the Hessian of the equivalent lower-dimension unconstrained problem. This relationship can be used to derive principal minor conditions for the former from the relatively simple and accessible...

We develop a new method for deriving minimal state variable (MSV) equilibria of a general class of Markov switching rational expectations models and a new algorithm for computing these equilibria. We compare our approach to previously known algorithms, and we demonstrate that ours is both...

Noisy rational expectations models, in which agents have dispersed private information and extract information from an endogenous asset price, are widely used in finance. However, these linear partial equilibrium models do not fit well in modern macroeconomics that is based on non-linear dynamic...

This paper proposes a homotopy method for implementing counterfactual experiments in empirical models with multiple equilibria. A key assumption is that the equilibrium selection function does not jump discontinuously between equilibria as we continuously change the structural parameters.

When risk averse forecasters are presented with risk neutral proper scoring rules, they report probabilities whose ratios are shaded towards 1. If elicited probabilities are used as inputs to decision-making, naive elicitors may violate first-order stochastic dominance.

Standard real business cycle models are often unable to replicate three empirical facts: positive output in response to good news, stochastic volatility of macro variables, and asymmetric business cycles. This paper proposes a unified basis for understanding these facts in a tractable dynamic...

We study the welfare implications of public information precision in a beauty contest framework allowing for optimal stabilization policies and information obfuscation. When policy makers’ ability to obfuscate information is constrained, increasing public information precision can be welfare...