We experimentally assess the predictive power of two equilibrium selection principles for binary N-player entry games with strategic complementarities. In static entry games, we test the theory of global games which posits that players play games of complete information as if they were playing a...

We study a communication game of common interest in which the sender observes one of infinite types and sends one of finite messages which is interpreted by the receiver. In equilibrium there is no full separation but types are clustered into contiguous cells. We give a full characterization of...

We study the development of a social norm of trust and reciprocity among a group of strangers via the “contagious strategy” as defined in Kandori (1992). Over an infinite horizon, the players anonymously and randomly meet each other and play a binary trust game. In order to provide the...

This paper studies the evolution of peoplesʼ models of how other people think – their theories of mind. This is formalized within the level-k model, which postulates a hierarchy of types, such that type k plays a k times iterated best response to the uniform distribution. It is found that,...

An experiment is designed to provide a snapshot of the strategies used by players in a repeated price competition game with a random continuation rule. One hundred pairs of subjects played the game over the Internet, with subjects having a few days to make their decisions in each round....

In a multi-stage contest known as a two-player race, players display two fundamental behaviors: (1) the laggard will make a last stand in order to avoid the cost of losing; and (2) the player who is ahead will defend his lead if it is threatened. Last stand behavior, in particular, contrasts...

A buyer procures a network to span a given set of nodes; each seller bids to supply certain edges, then the buyer purchases a minimal cost spanning tree. An efficient tree is constructed in any equilibrium of the Bertrand game.

We study, theoretically and experimentally, sealed-bid first-price auctions with and without package bidding. In the model, a global bidder bids for multiple items and can benefit from synergies, while local bidders bid for a single item. In the equilibrium, package bidding improves (hurts)...

We characterize the surplus-maximizing trading mechanism under two-sided incomplete information and interim individual rationality, when one party can make a value-enhancing specific investment. This mechanism exhibits a trade-off between providing investment incentives and inducing voluntary...

The standard method for computing the equilibrium strategies of asymmetric first-price auctions is the backward-shooting method. In this study we show that the backward-shooting method is inherently unstable, and that this instability cannot be eliminated by changing the numerical methodology of...