The literary source of the main ideas in Aumann's article ``Backward Induction and Common Knowledge of Rationality" is exposed and analyzed. The primordial archetypal images that underlie both this literary source and Aumann's work are delineated and are used to explain the great emotive impact...

Financial markets are to a very large extent influenced by the advent of information. Such disclosures, however, do not only contain information about fundamentals underlying the markets, but they also serve as a focal point for the beliefs of market participants. This dual role of information...

Folk Theorems in repeated games hold fixed the game payoffs, while the discount factor is varied freely. We show that these results may be sensitive to the order of limits in situations where players move asynchronously. Specifically, we show that when moves are asynchronous, then for a fixed...

This paper offers a noncooperative behaviourally-founded solution of the complete information bargaining problem where two impatient individuals wish to divide a unit pie. We formulate the game in continuous time, with unrestricted timing and content of offers. Reprising experimental work from...

We construct a dynamic heterogeneous-agent model with random uninsurable endowments. Two allocation mechanisms are considered, one with long-term complete credit arrangements under private information, and one with incomplete competitive markets. A role for money arises due to random limited...

We study the war of attrition and the all-pay auction when players' signals are affiliated and symmetrically distributed. We (a) find sufficient conditions for the existence of symmetric monotonic equilibrium bidding strategies; and (b) examine the performance of these auction forms in terms of...

A learning process is belief affirming if for each player, the difference between her expected payoff in the next period, and the average of her past payoffs converges to zero. We show that every smooth discrete fictitious play and every continuous fictitious play is belief affirming. We also...

The goal of the paper is to study how a menu of options affects decisions of a rational agent facing uncertainty over future payoff streams. Using the real options approach, we demonstrate that multiple options not only increase the barrier which the underlying stochastic variable has to reach...

This paper introduces learning dynamics into a posted-offer pricing game, in which sellers observe past-period transactions before announcing a take-it or leave-it price, and buyers either accept or reject the announced price. We consider the impact that seller access to information regarding...

This paper examines the issue of multiplicity of equilibria in alternating move repeated games with two players. Such games are canonical models of environments with repeated, asynchronous choices due to inertia or replacement. We focus our attention on Markov Perfect equilibria (MPE). These are...