This paper extends Savage's subjective approach to probability and utility from decision problems under exogenous uncertainty to choice in strategic environments. Interactive uncertainty is modeled both explicitly, using hierarchies of preference relations, the analogue of beliefs hierarchies,...

This paper generalizes a result by Samet concerning iterated expecta- tions and common priors. When a player in some state of the world is allowed to ascribe probability zero to that state, something not allowed in Samet s framework, iterated expectations may not converge, and when they do,...

We study the robustness of interim correlated rationalizability to perturbations of higher-order beliefs. We introduce a new metric topology on the universal type space, called uniform weak topology, under which two types are close if they have similar first-order beliefs, attach similar...

Previous research has established that the predictions made by game theory about strategic behavior in incomplete information games are quite sensitive to the assumptions made about the players' infinite hierarchies of beliefs. We evaluate the severity of this robustness problem by...

We suggest a model that describes how counterfactuals are constructed and justified. The model can describe how counterfactual beliefs are updated given the unfolding of actual history. It also allows us to examine the use of counterfactuals in prediction, and to show that a logically omniscient...

This paper explores the sale of an object to an ambiguity averse buyer. We show that the seller can increase his profit by using an ambiguous mechanism. That is, the seller can benefit from hiding certain features of the mechanism that he has committed to from the agent. We then characterize the...

We suggest a model that describes how counterfactuals are constructed and justified. The model can describe how counterfactual beliefs are updated given the unfolding of actual history. It also allows us to examine the use of counterfactuals in prediction, and to show that a logically omniscient...

We use a standard quantitative business cycle model with nominal price and wage rigidities to estimate two measures of economic inefficiency in recent U.S. data: the output gap - the gap between the actual and effcient levels of output - and the labor wedge|the wedge between households' marginal...

Differences in college enrollment rates between poor and rich students are a prevalent phenomenon, but particularly striking in Latin America. The literature suggests explanations such as differences in "college preparedness" on the one hand, in that poor students lack skills that enable them to...