We analyze a notion of self-confirming equilibrium with non-neutral ambiguity attitudes that generalizes the traditional concept. We show that the set of equilibria expands as ambiguity aversion increases. The intuition is quite simple: by playing the same strategy in a stationary environment,...

Reputation effects and other-regarding preferences have both been used to predict cooperative outcomes in markets with inefficient equilibria. Existing reputation-building models require either infinite time horizons or publicly observed identities, but cooperative outcomes have been observed in...

Demichelis & Weibull (AER 2008) show that adding lexicographic lying costs to coordination games with cheap talk yields a sharp prediction: only the efficient outcome is evolutionarily stable. I show that this result is caused by the discontinuity of preferences rather than by small lying costs...

Language is a powerful coordination device. We generalize the cheap-talk approach to pre-play communication by way of introducing a meaning correspondence between messages and actions, and by postulating two axioms met by natural languages. Players have a lexicographic preference, second to...

This paper studies how agents with conflicting interests learn to cooperate when the details of cooperation are not common knowledge. It considers a repeated game in which one player has incomplete information about when and how her partner can provide benefits. Initially, monitoring is...

Dynamic matching and bargaining games are models of decentralized markets with trading frictions. A central objective is to investigate how equilibrium outcomes depend on the level of frictions. In particular, does the trading outcome become Walrasian when frictions become small? Existing...

Geography and social links shape economic interactions. In industries, schools, and markets, the entire network determines outcomes. This paper analyzes a large class of games and obtains a striking result. Equilibria depend on a single network measure: the lowest eigenvalue. This paper is the...

A player i's actions in a game are determined by her beliefs about other players; these depend on the game's real-life context, not only its formal description. Define a game situation as a game together with such beliefs; call the beliefs— and i's resulting expectation—rational if there is...

We experimentally test an endogenous-timing investment model in which subjects privately observe their cost of investing and a signal correlated with the common investment return. Subjects overinvest, relative to Nash. We separately consider whether subjects draw inferences, in hindsight, and...