This working paper is a lightly edited version of two chapters of a book that I am currently writing. This book will present and defend a form of normative economics that conserves the main insights of the liberal tradition of classical and neoclassical economics but does not depend on strong...

This paper reports experimental tests of two alternative explanations of how players use focal points to select equilibria in one-shot coordination games. Cognitive hierarchy theory explains coordination as the result of common beliefs about players' pre-reflective inclinations towards the...

It has been argued that cognitively constrained consumers respond sub-optimally to complex decision problems, and that firms can exploit these limitations by introducing spurious complexity into tariff structures, weakening price competition. We model a countervailing force. Restricting one's...

Previous studies suggest that two otherwise robust 'anomalies' - preference reversals and disparities between buying and selling valuations - are eroded when respondents participate in repeated markets. We report an experiment which investigates whether this is true when factors neglected in...

This paper makes three related contributions to noncooperative game theory: (i) a solution concept (the 'ICEU solution'), which is generated by an iterative procedure that constructs trinary partitions of strategy sets and deals with problems arising from weak dominance; (ii) a class of models of...

This paper presents a new iterative procedure for solving finite noncooperative games, the reasoning-based expected utility procedure (RBEU), and compares this with existing iterative procedures. RBEU deletes more strategies than iterated deletion of strictly dominated strategies, while avoiding...

The game-theoretic assumption of "common knowledge of rationality" leads to paradoxes when rationality is represented in a Bayesian framework as cautious expected utility maximisation with independent beliefs (ICEU). We diagnose and resolve these paradoxes by presenting a new class of formal...