Theories of bounded rationality are typically characterized over an exhaustive data set. How does one tell whether observed choices are consistent with a theory if the data is incomplete? How can out-of-sample predictions be made? What can be identified about preferences? This paper aims to...

Attainment of rational expectations equilibria in asset markets calls for the price system to disseminate traders’ private information to others. It is known that markets populated by asymmetrically-informed profit-motivated human traders can converge to rational expectations equilibria. This...

The use of equilibrium models in economics springs from the desire for parsimonious models of economic phenomena that take human reasoning into account. This approach has been the cornerstone of modern economic theory. We explain why this is so, extolling the virtues of equilibrium theory; then...

This paper presents results from a series of second price private value auction (SPA) experiments in which bidders are either given for free, or are allowed to purchase, noisy signals about their opponents' value. Even though theoretically such information about opponents' value has no strategic...

We study the "generalized correlated equilibria" of a game when players make information processing errors. It is shown that the assumption of information processing errors is equivalent to that of "subjectivity" (i.e., differences between the players' priors). Hence a bounded rationality...

Rubinstein and Wolinsky (1990b) consider a simple decentralized market in which agents either meet randomly or choose their partners volunatarily and bargain over the terms on which they are willing to trade. Intuition suggests that if there are no transaction costs, the outcome of this matching...

Attainment of rational expectations equilibria in asset markets calls for the price system to disseminate agents’ private information to others. Markets populated by human agents are known to be capable of converging to rational expectations equilibria. This paper reports comparable market...

We examine a repeated interaction between an agent, who undertakes experiments, and a principal who provides the requisite funding for these experiments. The agent’s actions are hidden, and the principal cannot commit to future actions. The repeated interaction gives rise to a dynamic agency...

We examine a repeated interaction between an agent, who undertakes experiments, and a principal who provides the requisite funding for these experiments. The repeated interaction gives rise to a dynamic agency cost — the more lucrative is the agent’s stream of future rents following a...

We examine a repeated interaction between an agent, who undertakes experiments, and a principal who provides the requisite funding for these experiments. The repeated interaction gives rise to a dynamic agency cost—the more lucrative is the agent’s stream of future rents following a failure,...