We consider a general scheme to construct Bayesian incentive-compatible mechanisms using a suitable ‘variable mechanism parametrization.’ The key idea is to perturb a given direct mechanism, which might not be truth revealing, introducing sufficient variability as a function of agents’ announcements to generate incentives for truthful revelation. We discuss a variable-price auction in a general...

We conduct a proper test of the claim that people are overcon…dent, in the sense that they believe that they are better than others. The results of the experiment we present do not allow us to reject the hypotheses that the data has been generated by perfectly rational, unbiased, and appropriately con…dent agents. Keywords: Overcon…dence; Better than Average; Experimental Economics; Irrationali...

We conduct a carefully designed random-assignment experiment to investigate whether negative affect impacts overconfidence. Our result indicates that, compared to neutralaffect, fear and sadness significantly increase overconfidence. All decisions were incentivized, and the result is robust to various specification checks. Further, our result has implications for the role of emotions in economi...

It is known that every continuous time fictitious play process approaches equilibrium in every nondegenerate 2×2 and 2×3 game, and it has been conjectured that convergence to equilibrium holds generally for 2×n games. We give a simple geometric proof of this. As a corollary, we obtain the same result for the discrete fictitious play process. Journal of Economic Literature classification numbers...

We assess whether imperfect knowledge of labor regulation hinders job creation at small and medium-sized firms. partner with a law expert organization that provides information about via newsletters access to specialized website. randomly assign 1,800 firms get this service for 21-week period. Six months later, the average employment level treatment was 12 percent higher than control The interv...

A learning process is belief affirming if the difference between a player's expected payoff in the next period, and the average of his or her past payoffs converges to zero. We show that every smooth discrete fictitious play and every continuous fictitious play is belief affirming. We also provide conditions under which general averaging processes are belief affirming. Journal of Economic Liter...

In a partially-specified correlated equilibrium (PSCE ) the players are partially informed of the conditional strategies of the other players, and they best respond to the worst-case possible strategy. We construct a decentralized procedure that converges to PSCE when the monitoring is imperfect. This procedure is based on minimizing conditional regret when players obtain noisy signals that dep...

This paper analyzes the question whether traders learn to coordinate on a trading institution that guarantees market clearing, or whether other market institutions can survive in the long run. While we find that the market clearing institution is indeed always stable under a general class of learning dynamics, it turns out that also other, non-market clearing institutions are stable. Hence, in ...

In an asset-pricing model, risk-averse agents need to forecast the conditional variance of a stock’s return. A near-rational restricted perceptions equilibrium exists in which agents believe prices follow a random walk with a conditional variance that is self-fulfilling. When agents estimate risk in real-time, recurrent bubbles and crashes can arise. These effect are stronger when agents allow ...