Building on Battigalli and Dufwenberg (2009)'s framework of dynamic psychological games and the recent progress in the modeling of dynamic unawareness, we provide a general framework that allows for `unawareness' in the strategic interaction of players motivated by belief-dependent psychological...

We apply the dynamic stochastic framework proposed in the recent evolutionary literature to a class of coordination games played simultaneously by the entire population. In these games, payoffs whence best replies are determined by a summary statistic of the population strategy profile. We...

In this note it is shown that if the Pareto frontier of the one-shot game is strictly concave and contains the Pareto frontier of the set of weakly renegotiation-proof equilibrium average payoffs, and if there is a player who always has a short-run incentive to deviate from any action pair...

This study investigates the structure of optimal incentives in a stochastic environment and provides evidence for the use of self-enforcing relational contracts. We show theoretically that under relational contracting, firms can credibly promise chief executive officers (CEOs) larger bonuses in...

This paper investigates how social composition affects social conflict and economic development when property rights are unenforceable. Groups follow Markovian strategies for consumption and investment and may also spend effort in an resource appropriation contest. It is shown that conflict...

This paper considers the well-known Levhari-Mirman model of resource extraction, and investigates the effects of the information structure of the dynamic game - open-loop, Markovian or history-dependent - on the equilibrium consumption path and the overall utility of the agents. The open-loop...

We investigate how social composition affects competitive and cooperative behavior in a linear growth model without a priori secure property rights. If a society is homogenous or highly fractionalized it is in the self-interest of people to cooperate. The first best allocation is enforced...

This paper contributes to the micro-foundation of money in centralized markets with idiosyncratic uncertainty. It shows existence of stationary monetary equilibria and ensures that there is an optimum quantity of money. The rational solution of our model is compared with actual behavior in a...

Two firms selling a homogenous product to two types of buyers are involved in a sequential pricing game with zero costs. The pricing strategy available involves a fixed price and a royalty. It is shown that there exists a unique subgame perfect equilibrium with positive profits to both firms if...

This paper proposes a general incomplete information framework for studying behavior in strategic games with stepwise (viz. `level-k' or `cognitive hierarchy') thinking, which has been found to describe strategic behavior well in experiments involving players' initial responses to games. It is...