We introduce intention-based social preferences into a Bayesian mechanism design framework. We first show that, under common knowledge of social preferences, any tension between material efficiency, incentive compatibility, and voluntary participation can be resolved. Hence, famous impossibility...

This paper studies the institutional design of the coordination of macroeconomic stabilization policies within a monetary union in the framework of linear quadratic differential games. A central role in the analysis plays the partitioned game approach of the endogenous coalition formation...

This paper discusses the strategic role of mismatching, where players voluntarily form inefficient teams or forego the formation of efficient teams, respectively. Strategic mismatching can be rational when players realize a competitive advantage (e.g. harming other competitors). In addition, the...

This paper proposes a model for a certification market with an imperfect testing technology. Such a technology only assures that whenever two products are tested the higher quality product is more likely to pass than the lower quality one. When only one certifier with such testing technology is...

This paper characterizes geometrically the set of all Nash equilibrium payoffs achievable with unmediated communication in persuasion games, i.e., games with an informed expert and an uninformed decisionmaker in which the expert's information is certifiable. The first equilibrium...

Private provision of public goods often takes place as a war of attrition: individuals wait until someone else volunteers and provides the good. After a certain time period, however, one individual may be randomly selected. If the individuals are uncertain about their cost of provision, but can...

We compare the behavior of car mechanics and college students as sellers in experimental credence goods markets. Finding largely similar behavior, we note much more overtreatment by car mechanics, probably due to decision heuristics they learned in their professional training.

Empirical evidence suggests that banks often engage in refinancing of intrinsically insolvent debtors instead of writing of their non-performing loans. Such forbearance lending may induce soft budget constraints for the debtors, as it diminishes their incentives to thwart default. This paper...

We consider a game played by a state sponsor of terrorism, a terrorist group, and the target of terrorist attacks. The sponsoring state wishes to see as much damage inflicted on the target of attack as possible, but wishes to avoid retaliation. To do so, his relationship with the terrorist group...

We provide a game theoretic analysis of how power shapes the clarity of communication. We analyze information transmission in a cheap talk bargaining game between an informed Sender and an uninformed Receiver. Theoretically, we find that the maximum amount of information that can be transmitted...