The common prior assumption justifies private beliefs as posterior probabilities when updatinga common prior based on individual information. Common priors are pervasive in most economicmodels of incomplete information and oligopoly models with asymmetrically informed firms. Wedispose of the...

In a stochastic duopoly market, sellers must form state-specific aspirationsexpressing how much they want to earn given their expectationsabout the other's behavior. We define individually and mutually satisficingsales behavior for given individual beliefs and aspiration profiles. In afirst...

We study a market in which both buyers and sellers can decide to preempt and set theirquantities before market clearing. Will this lead to preemption on both sides of the market,only one side of the market, or to no preemption at all? We …nd that preemption tends to beasymmetric in the sense...

The common prior assumption asserts that the beliefs of agents in different states of theworld are their posteriors based on a common prior and possibly some private signal. Commonpriors are pervasive in most economic models of incomplete information, oligopoly models withasymmetrically informed...

On an otherwise symmetric oligopoly market with stochastic demands for heterogeneousproducts firms can either hire an employee or partner or buy therequired labor input on the labor market. Whereas the wage of hired labor doesnot depend on the realization of stochastic demand, the price of...

We introduce a generalized theoretical approach to study imitation andsubject it to rigorous experimental testing. In our theoretical analysiswe …nd that the different predictions of previous imitation models aredue to different informational assumptions, not to different behavioralrules. It is...

Internet experiments are a new and convenient way for reaching a large subject pool. Yet, providing incentives to subjects can be a tricky design issue. One cost effective and simple method is the publication of a high score (as in computer games). We test whether a high score provides adequate...

Suppose the value of a firm is endogenously determined by a manager's costly effort. We call this manager a distinguished player if he also can trade shares of the firm on a market. Arbitrage-free asset pricing theory suggests that the equilibrium market price reflects the value increasing...

Using the concept of market-distribution functions, we derive general optimality conditions for discriminatory divisible-good auctions, which are also applicable to Bertrand games and non-linear pricing. We introduce the concept of offer distribution function to analyze randomized offer curves,...

We use an experiment to explore how subjects learn to play against computers which are programmed to follow one of a number of standard learning algorithms. The learning theories are (unbeknown to subjects) a best response process, fictitious play, imitation, reinforcement learning, and a trial...