This paper develops a positive model of informal contracting in which rewards and punishments are not determined by an ex ante optimal plan but instead express the ex post moral sentiments of the arbitrating party. We consider a subjective performance evaluation problem in which a principal can...

In a range of settings, private firms manage peer effects by sorting agents into different groups, be they schools, communities, or product categories. This paper considers such a firm, which controls group entry by setting a series of anonymous prices. We show that private provision...

In a general interdependent preference environment, we characterize when two payoff types can be distinguished by their rationalizable strategic choices without any prior knowledge of their beliefs and higher order beliefs. We show that two payoff types are strategically distinguishable if and...

A key to the Coase conjecture is the monopolist's inability to commit to a price, which leads consumers to believe that a high current price will be followed by low future prices. This paper studies the robustness of the Coase conjecture with respect to these beliefs of consumers. In particular,...

We study a problem of optimal auction design in the realistic case in which the players can collude both on the way they play in the auction and on their participation decisions. Despite the fact that the principal's opportunities for extracting payments from the agents in such a situation are...

This paper considers a model of a rating agency with multiple clients, in which each client has a separate market that forms a belief about the quality of the client after the agency issues a rating. When the clients are rated separately (individual rating), the credibility of a good rating in...

This paper extends Savage's subjective approach to probability and utility from decision problems under exogenous uncertainty to choice in strategic environments. Interactive uncertainty is modeled both explicitly, using hierarchies of preference relations, the analogue of beliefs hierarchies,...

This paper considers a nonlinear pricing framework with both horizontally and vertically differentiated products. By endogenizing the set of consumers served in the market, we are able to study how increased competition affects nonlinear pricing, in particular the market coverage and quality...

This paper studies bilateral trade in which the seller makes a hidden investment that influences the buyer's hidden valuation. In general it is impossible to implement both first-best efficient trade and efficient investment using budget-balanced trading mechanisms. The paper fully characterizes...

This paper analyzes multi-sender cheap talk when the state space might be restricted, either because the policy space is restricted, or the set of rationalizable policies of the receiver is not the whole space. We provide a necessary and sufficient condition for the existence of a fully...