We propose a new welfare criterion that allows us to rank alternative financial market structures in the presence of belief heterogeneity. We analyze economies with complete and incomplete financial markets and/or restricted trading possibilities in the form of borrowing limits or transaction...

One of the outstanding results of three decades of laboratory market research is that under rather weak conditions prices and quantities in competitive experimental markets converge to the competitive equilibrium. Yet, the design of these experiments ruled out gift exchange or reciprocity...

We examine an Outside Option Game in which player I submits a claim for a share of a cake while player II simultaneously either makes a claim or chooses to opt out. If player II opts out, then she receives an opt-out payment while player I receives nothing. If player II opts in and if the claims...

In a two-stage extensive form game where followers can observe moves by leaders only with noise, pure subgame perfect Nash equilibria of the limiting game without noise may not survive arbitrarily small noise. Still, for generic games, there is always at least one subgame perfect equilibrium...