There is growing evidence on the roles of fairness and other-regarding preferences as fundamental human motives. Call voters with fair preferences, as in Fehr and Schmidt (1999), fair-voters. By contrast, traditional political economy models are based on selfish-voters who derive utility solely...

In standard political economy models, voters are "self-interested" that is, care only about "own" utility. However, the emerging evidence indicates that voters often have "other-regarding preferences" (ORP), that is, in deciding among alternative policies voters care about their payoffs relative...

A critical element in all discounted utility models is the specification of a discount function. We extend the standard model to allow for reference points for both out- comes and time. We consider the axiomatic foundations and properties of two main classes of discount functions. The first, the...

Standard equilibrium concepts in game theory find it difficult to explain the empirical evidence in a large number of static games such as prisoners’ dilemma, voting, public goods, oligopoly, etc. Under uncertainty about what others will do in one-shot games of complete and incomplete...

We consider a discounted utility model that has two components. (1) The instan- taneous utility is of the prospect theory form, thus, allowing for reference dependent outcomes. (2) The discount function embodies a ‘reference time’ to which all future outcomes are discounted back to, hence,...

Many diverse problems in economics can only be reasonably explained by assuming that people have social preferences, i.e., in addition to their own payoffs they are altruistic towards those who are poorer and envious towards those who are richer. How do people with social preferences choose...

In a seminal paper, Becker (1968) showed that the most efficient way to deter crime is to impose the severest possible penalty (to maintain adequate deterrence) with the lowest possible probability (to economize on costs of enforcement). We shall call this the Becker proposition (BP). The BP is...

Let a large-number of small-individuals contribute to charity. We show that ‘strong aggregate complementarity’ is necessary for multiple equilibria in a competitive equilibrium. Consider two equilibria with low (L) and high (H) levels of giving. Suppose that society is stuck at L and wishes...

Under uncertainty about what others will do, evidence suggests that people often use evidential reasoning (ER), i.e., they assign diagnostic significance to their own actions in forming beliefs about the actions of others. ER successfully explains the evidence from many important games. We...

Given the recent experience, there is a growing interest in the liquidity trap, which occurs when the nominal interest rate reaches its zero lower bound. We outline the surprising policy recommendations when there is the possibility of a zero lower bound. Then, using the Dixit-Lambertini...