We study the optimal regulation of a monopolist when intrinsic efficiency (intrinsic cost) and empire building tendency (marginal utility of output) are private information, but actual cost (the difference between intrinsic cost and effort level) is observable. This is a problem of...

Social motives are frequently used to explain deviations from selfishness in non-strategic settings such as the Dictator Game. Previous research has mainly focused on two-player games; the workings of social motives in multiplayer Dictator Games are less well understood. A core feature of...

This paper develops a game-theoretic and epistemic account of a peculiar mode of practical reasoning that sustains focal points but also more general forms of rule-following behavior which I call community-based reasoning (CBR). It emphasizes the importance of counterfactuals in strategic...

The outcome of many social and economic interactions, such as stock-market transactions, is strongly determined by the predictions that agents make about the behavior of other individuals. Cognitive hierarchy theory provides a framework to model the consequences of forecasting accuracy that has...

A game-theoretic model of repeated interaction between two potential adversaries is analyzed to illustrate how conflict could possibly arise from rational decision-makers endogenously processing information, without any exogenous changes to the fundamentals of the environment. This occurs as a...

A four period game between two firms and two hackers is analyzed. The firms first defend and the hackers thereafter attack and share information. Each hacker seeks financial gain, beneficial information exchange, and reputation gain. The two hackers’ attacks and the firms’ defenses are...

Many scholars turn to emotions to understand irrational behavior. We do the opposite: we turn to rationality and game theory to understand people’s emotions. We discuss a striking theory of emotions that began with the game theory of credible threats and promises, then was enriched by...

In this paper we put forward a simple game-theoretical model of pollution control, where each country is in control of its own pollution, while the environmental effects of policies do not stop at country borders. In our noncooperative differential game, countries as players minimize the present...