Strategic interaction occurs whenever it depends on others what one finally obtains: on markets, in firms, in politics etc. Game theorists analyse such interaction normatively, using numerous different methods. The rationalistic approach assumes perfect rationality whereas behavioral theories...

We study a model that involves identity-dependent, asymmetric negative external effects. Willingness to pay, which can be computed only in equilibrium, will reflect, besides private valuations, also preemptive incentives stemming from the desire to minimize the negative externalities. We find...