The mathematical framework of psychological game theory is useful for describing many forms of motivation where preferences depend directly on own or others' beliefs. It allows for incorporating, e.g., emotions, reciprocity, image concerns, and self-esteem in economic analysis. We explain how...

Frustration, anger, and aggression have important consequences for economic and social behavior, concerning for example monopoly pricing, contracting, bargaining, traffic safety, violence, and politics. Drawing on insights from psychology, we develop a formal approach to exploring how...

We propose a theory of international agreements on product standards. The key feature of the model is that agreements are viewed as incomplete contracts. In particular, these do not specify standards for products that may arise in the future. One potential remedy to contractual incompleteness is...

We examine a model of contracting where parties interact repeatedly and can contractat any point in time, but writing enforceable contracts is costly. A contract can describe contingencies and actions at a more or less detailed level, and the cost of writing a contract is proportional to the...

This paper analyses the sources of buyer power and its expect on sellers investment. We show that a retailer extracts a larger surplus from the negotiation with an upstream manufacturer the more it is essential to the creation of total surplus. In turn, this depends on the rivalry between...

We propose a theory of international agreements on product standards. The key feature of the model is that agreements are viewed as incomplete contracts. In particular, these do not specify standards for products that may arise in the future. One potential remedy to contractual incompleteness is...

Gneezy (2005) reports evidence indicating that in some settings people do not like to lie. In many other situations people do not suffer when they lie. We argue that the theory of simple guilt can accommodate these observations.

In a decision problem under uncertainty, a decision maker considers a set of alternative actions whose consequences depend on uncertain factors outside his control. Following Luce and Raiffa (1957), we adopt a natural representation of such situation that takes as primitives a set of conceivable...