We introduce a new solution concept for games in extensive form with perfect information, valuation equilibrium, which is based on a partition of each player's moves into similarity classes. A valuation of a player is a real-valued function on the set of her similarity classes. In this...

This paper reexamines the paradoxical aspect of the electronic mail game (Rubinstein, 1989). The electronic mail game is a coordination game with payoff uncertainty. At a Bayesian Nash equilibrium of the game, players cannot achieve the desired coordination of actions even when a high order of...

Efficiency wage effects of profit sharing are combined with option values related to stochastic future profit variations. These option effects occur if the workers' profit share is fixed by long-term contracts. The Pareto-improving optimal level of the sharing ratio is calculated for two...

We analyze a market game where firms choose capacities under uncertainty about future market conditions and make output choices after uncertainty has unraveled. We show existence and uniqueness of equilibrium under imperfect competition and establish that capacity choices by strategic firms are...

Efficiency wage effects of profit sharing are combined with option values related to stochastic future pofit variations. These option effects occur if the workers' profit share is fixed by long-term contracts. The Pareto-improving optimal level of the sharing ratio is calculated for two...

This paper presents a model of Rule of Law in which a continuum of agents plays against the State for the appropriation of the economic assets of a stylised economy. The model shows how each agent can either challenge the State or acquiesce, with the latter having the choice of either protecting...

This paper investigates whether language priming activates different cultural identities and norms associated with the language communicated; bilingual subjects are given Chinese instructions in the Chinese treatment and English instructions in the English treatment. The main findings are: (1) in...

We study how the framework of classical game theory changes when the preferences of the players are described by Prospect Theory instead of Expected Utility Theory. Specifically, we study the influence of framing effect and probability weighting on the existence and specific structure of Nash...

Absentmindedness is a special case of imperfect recall which according to Piccione and Rubinstein (1997a) leads to time inconsistencies. Aumann, Hart and Perry (1997a) question their argument and show how dynamic inconsistencies can be resolved. The present paper explores this issue from a...

This paper investigates the effects of neighborhood size and network structure on strategic experimentation. We analyze a multi-arm bandit game with one safe and two risky alternatives. In this setting, risk taking produces a learning externality and an opportunity for free riding. We conduct a...