In experimental partnership dissolution problems with complete information, the divide-and-choose mechanism is significantly superior to the winner’s-bid auction. The performance of divide-and-choose is mainly affected by reciprocity issues and not by bounded rationality. The performance of the winner’s-bid auction is significantly affected by bounded rationality. Contrary to theoretical predic...

Researchers have proposed various theories to explain overbidding in rentseeking contents, including mistakes, systematic biases, the utility of winning, and relative payoff maximization. Through an eight-part experiment, we test and find significant support for the existing theories. Also, we discover some new explanations based on cognitive ability and impulsive behavior. Out of all explanati...

We consider the effects of risk preferences in mixed-strategy equilibria of 2 × 2 games, provided such equilibria exist. We identify sufficient conditions under which the expected payoff in the mixed equilibrium increases or decreases with the degree of risk aversion. We find that (at least moderate degrees of) risk aversion will frequently be beneficial in mixed equilibria. © 2007 Elsevier Inc...

In experimental games, we observe the following phenomena: (1) many subjects cooperate contrary to their material interest, (2) they cooperate in a reciprocal manner, (3) subjects often punish those others who behave unkindly, and (4) previous history usually influences subjects’ choices. We propose a simple game-theoretical model to account for these and other experimental phenomena, and compa...

This entry shows why self-interested agents manage to cooperate in a long-term relationship. When agents interact only once, they often have an incentive to deviate from cooperation. In a repeated interaction, however, any mutually beneficial outcome can be sustained in an equilibrium. This fact, known as the folk theorem, is explained under various information structures. This entry also compa...

We study a sequential protocol of endogenous coalition formation based on a process of bilateral agreements among the players. We apply the game to a Cournot environment with linear demand and constant average costs. We show that the final outcome of any Subgame Perfect Equilibrium of the game is the grand coalition, provided the initial number of firms is high enough and they are sufficiently ...

This paper extends the nonexistence result of Heifetz and Samet (Games Econ. Behav. 22 (1998) 260–273). They have shown that there exists no universal knowledge space to which every knowledge space can be mapped in a knowledge-preserving manner. We show that an analogous nonexistence result holds in the more general context of information structures. These structures can be viewed as generaliza...

We show that in large …nite economies, core allocations can be approximately decentralized as Nash (rather than Walras) equilibrium. We argue that this exercise is an essential complement to asymptotic core equivalence results, because it implies that in some approximate sense individual attempts to manipulate the decentralizing prices cannot be bene…cial, which …ts precisely the interpretation...

This paper examines repeatedly implementing a social choice function in a general complete information environment where agents are in…nitely-lived and their preferences are determined stochastically in each period. We …rst demonstrate a necessary role that e¢ ciency plays for repeated implementation. We then establish how any e¢ cient social choice function can be repeatedly implemented in Nas...

We examine a variety of stability and equilibrium de…nitions that have been used to study the formation of social networks among a group of players. In particular we compare variations on three types of de…nitions: those based on a pairwise stability notion, those based on the Nash equilibria of a link formation game, and those based on equilibria of a link formation game where transfers are po...