We characterize dominant-strategy incentive compatibility with multidimensional types. A deterministic social choice function is dominant-strategy incentive compatible if and only if it is weakly monotone (W-Mon). The W-Mon requirement is the following: If changing one agent's type (while...

Learning by observing the past decisions of others can help explain some otherwise puzzling phenomena about human behavior. For example, why do people tend to converge on similar behavior? Why is mass behavior prone to error and fads? The authors argue that the theory of observational learning,...

Preferences may arise from regret, i.e., from comparisons with alternatives forgone by the decision maker. When each outcome in a random variable is compared with the parallel outcome in an alternative random variable, regret preferences are transitive iff they are expected utility. In this...

An information cascade occurs when it is optimal for an individual, having observed the actions and possibly payoffs of those ahead of him, to take the same action regardless of his own information. When there are informational cascades, society may reap only a modest fraction of the potential...

It is well known that when agents' types are correlated, the mechanism designer can extract the entire surplus. This creates an incentive for agents to acquire information about other agents' types. Robust lotteries (are payment schemes that) support full extraction and partially robust...

Policymakers often express concern that herding by financial market participants destabilizes markets and increases the fragility of the financial system. This paper provides an overview of the recent theoretical and empirical research on herd behavior in financial markets. It addresses the...