We examine an evolutionary model of bargaining behavior in a society where resources are finite. Agents who develop better strategies for bargaining and trading come to dominate the population. We show that successful agents exhibit loss aversion and an "endowment effect." When information is...

In order to regulate risk taking efficiently, tort liability rules governing organizations' liability for torts by their agents should ensure that organizations both want their agents to take optimal precautions and benefit from using cost-effective mechanisms to regulate agents. This chapter...

This paper introduces a formal model of contract incompleteness based on the observation that individuals cannot anticipate and plan for all possible future contingencies. Using a version of the multi-tasking model of Holmstrom-Milgrom (1991), it is shown that the trade-off between the use of an...

Most contracts that individuals enter into are not written from scratch but depend upon forms and terms that have been successful in the past. In this paper we study the structure of the form construction contracts published by the American Institute of Architects (AIA). We show that these...

This Article provides an economic analysis of optimal negligence liability for physicians and Managed Care Organizations explicitly modeling the role of physician expertise and MCO authority. We find that even when patients anticipate the risks imposed on them, physicians and MCOs do not take...

As Posner (1997) has observed, when individuals in a relationship can commit to imposing costs upon each other then efficient behavior in the absence of law is possible. The question is whether efficient norms of behavior evolve endogenously in a population. We show that in a standard hold up...

This paper explores the use of heuristic search algorithms for modeling human decision making. It is shown that this algorithm is consistent with many observed behavioral regularities, and may help explain deviations from rational choice. The main insight is that the heuristic function can be...

This paper extends the standard principal-agent model to allow for subjective evaluation. It is shown that the optimal contract entails the use of more compressed evaluations relative to the case with objective performance measures. The degree of compression increases as the correlation between...

This paper illustrates how the explicit introduction of planning costs into a model of decision making under uncertainty can result is a theory of learning by doing that is empirically implementable. Even when not optimal, it is shown that learning by doing results in convergence to optimal...

This paper explores the set of stochastically stable equilibria in a model in which individuals first decide to make a high or low investment, and then are matched to play a Nash demand game. If an agreement is not reached, then they are re-matched in the next period, and obtain a payoff...