We analyze a sequential bargaining model, where players are allowed to hold different beliefs about which players will make an offer and when. Excessive optimism about making offers in the future can cause a delay in agreement. Despite this, the main result states that, if players will remain...

We analyze the subgame-perfect equilibria of a game where two agents bargain in order to share the risk in their assets that will pay dividends once at some fixed date. The uncertainty about the size of the dividends is resolved gradually by the payment date and each agent has his own view about...

Under a firm deadline, agreement in bargaining is often delayed until the deadline. I propose a rationale for this deadline effect that naturally comes from the parties' optimism about their bargaining power. I then show that the deadline effect disappears if the deadline is stochastic and the...

Towards developing a theory of systematic biases about strategies, I analyze strategic implications of a particular bias: wishful thinking about the strategies. Considering canonical state spaces for strategic uncertainty, I identify a player as a wishful thinker at a state if she hopes to enjoy...

Present economic theories make a common-knowledge assumption that implies that the first or the second-order beliefs determine all higher order beliefs. We analyze the role of such closing assumptions at finite orders by instead allowing higher orders to vary arbitrarily. Assuming that the space...

This paper develops and tests a model of sequential decision making where a first stage of ranking a set of alternatives is followed by a second stage of determining the value of these same alternatives. The model assumes a boundedly rational Bayesian decision maker who is uncertain about...

I analyze a sequential bargaining model in which players are optimistic about their bargaining power (measured as the probability of making offers), but learn as they play the game. I show that there exists a uniquely predetermined settlement date, such that in equilibrium the players always...

For a finite set of actions and a rich set of fundamentals, consider the rationalizable actions on a universal type space, endowed with the usual product topology. (1) Generically, there exists a unique rationalizable action profile. (2) Every model can be approximately embedded in a...

It is a common fear in many countries that ideological parties will come to power through elections but will implement extreme policies and even end the democratic regime. Many countries cope with this problem by overriding the election results when such parties are elected. In a two-period...

In some games, the impact of higher-order uncertainty is very large, implying that present economic theories may be misleading as these theories assume common knowledge of the type structure after specifying the first or the second orders of beliefs. Focusing on normal-form games in which the...