First we show that for wealth-constrained agents who may commit an act twice the optimal sanctions are the offender's entire wealth for the first and zero for the second crime. Then we ask the question whether this decreasing sanction scheme is subgame perfect (time consistent), i.e., does a...

We experimentally test the hypothesis that players' valuations of a game coincide with their Nash equilibrium earnings. Our results offer significantly less support for this hypothesis than for the prediction of dominant strategy play.

Perfect information games have a particularly simple structure of equilibria in the associated normal form. For generic such games each of the finitely many connected components of Nash equilibria is contractible. For every perfect information game there is a unique connected and contractible...

This paper concludes that, when offenders are wealth constrained and the government is resource constrained and can commit to a certain policy throughout the whole planning horizon, cost minimizing deterrence is decreasing, rather than increasing, in the number of offenses. By extending the...

Limiting inspection to publicly correlated strategies linearizes the problem of finding subgame perfect equilibria for indefinitely repeated Prisoners' Dilemmas. Equilibrium strategies satisfy a matrix inequality; the matrix depends on the duration of the punishment mechanism. The existence of...

Perfect information games have a particularly simple structure of equilibria in the associated normal form. For generic such games each of the finitely many connected components of Nash equilibria is contractible. For every perfect information game there is a unique connected and contractible...

This paper examines how to construct subgame-perfect mixed-strategy equilibria in discounted repeated games with perfect monitoring. We introduce a relatively simple class of strategy profiles that are easy to compute and may give rise to a large set of equilibrium payoffs. These sets are called...

This paper establishes existence of subgame perfect equilibrium for a general class of sequential multi-lateral bargaining games. The only required hypothesis is that utility functions are continuous on the space of economic outcomes. In particular, no assumption on the space of feasible payoffs...

We present an experiment designed to separate the two commonplace explanations for behavior in ultimatum games—subjects’ concern for fairness versus the failure of subgame perfection as an equilibrium refinement. We employ a tournament structure of the bargaining interaction to...