The rapid growth of online retail in the last decade has led to widespread use of consumer-generated ratings. This paper theoretically and experimentally identifies influences that drive consumers to rate products and examines how those factors can create distortions in product ratings. By...

We analyse pricing, effort and tipping decisions at the online service ‘Google Answers’. Users set a price for the answer to their question ex ante, and they can additionally tip the researcher who provided the answer ex post.

We develop a Bayes–Nash analysis of the generalized second-price (GSP) auction, the multi-unit auction used by search engines to sell sponsored advertising positions. Our main result characterizes the efficient Bayes–Nash equilibrium of the GSP and provides a necessary and sufficient...

From the regulation of sports to lawmaking in parliament, in many situations one group of people (“agents”) make decisions that affect the payoffs of others (“principals”) who may offer action-contingent transfers in order to sway the agents' decisions. Prat and Rustichini (2003)...

Expert advice is often biased in ways that benefit the advisor. We demonstrate how self-deception helps advisors be biased while preserving their self-image as ethical and identify limits to advisors' ability to self-deceive. In experiments where advisors recommend one of two investments to a...

This paper develops a model of bargaining over decision rights between an uninformed principal and an informed but self-interested agent. We introduce two different bargaining mechanisms: tacit and explicit bargaining. In tacit bargaining, an uninformed principal makes a take-it-or-leave-it...

We introduce a framework for modeling pairwise interactive beliefs and provide an epistemic foundation for Nash equilibrium in terms of pairwise epistemic conditions locally imposed on only some pairs of players. Our main result considerably weakens not only the standard sufficient conditions by...

We study observational learning in environments with congestion costs: an agent's payoff from choosing an action decreases as more predecessors choose that action. Herds cannot occur if congestion on every action can get so large that an agent prefers a different action regardless of his beliefs...

Reputations often guide sequential decisions to trust and to reward trust. We consider situations where each player is randomly matched with a partner in every period. One player – the truster – decides whether to trust. If trusted, the other player – the temptee – has a temptation to...

We examine a model of limited communication in which the seller is selling a single good to two potential buyers. In each of the finite number of periods the seller asks one of the two buyers a binary question. After the final answer, the allocation and the transfers are executed. The model...