The definition of fictitious play may depend on first move rules, initial beliefs, weights assigned to initial beliefs, and tie-breaking rules determining the particular best replies chosen at each stage. Using the original definition of Brown (1951) in which the first moves are chosen arbitrarily and no tie-breaking rules are assumed, we give an example of a fictitious play process in a 2 × 2 ...

Standard incentive theory models provide a rich framework for studying informational problems but assume that contracts can be perfectly enforced. This paper studies the design of self-enforced relational contracts. I show that optimal contracts often can take a simple stationary form, but that self-enforcement restricts promised compensation and affects incentive provision. With hidden informa...

We provide a novel characterization of the feasible payo¤ set of a general two-player repeated game with unequal discounting. In particular, we show that generically the Pareto frontier shifts outwards and the feasible payo¤ set expands in the sense of set inclusion, as the time horizon increases. This result reinforces and re…nes the insight in Lehrer and Pauzner (1999) by showing that a longe...

The ability to accurately assess others’ intents, beliefs, and emotions – called Theory of Mind (ToM) – is conjectured to be important for social cooperation. We study the role of ToM ability in fostering cooperation in the simultaneous and sequential prisoners dilemma (PD) games. Our norm-based model predicts that high ToM ability individuals will believe in more cooperation and cooperate at h...

This paper studies repeated games with imperfect public monitoring where the players are uncertain both about the payoff functions and about the relationship between the distribution of signals and the actions played. To analyze these games, we introduce the concept of perfect public ex-post equilibrium (PPXE), and show that it can be characterized with an extenstion of the techniques used to s...

This paper studies discounted stochastic games with perfect or imperfect public monitoring and the opportunity to conduct voluntary monetary transfers. We show that for all discount factors every public perfect equilibrium payoff can be implemented with a simple class of equilibria that have a stationary structure on the equilibrium path and optimal penal codes with a stick and carrot structure...

We analyze an equilibrium concept called revision-proofness for infinite-horizon games played by a dynasty of players. Revision-proofness requires strategies to be robust to joint deviations by multiple players and is a refinement of sub-game perfection. Sub-game perfect paths that can only be sustained by reversion to paths with payoffs below those of an alternative path are not revision-proof...

Weuse aggregation theory to investigate the link between one-consumer andmulti-consumer economies under a quasi-linear class of preferences. Our study is carried out in the context of the neoclassical growthmodel. The quasi-linear preferences considered are additive in consumption and leisure and linear in leisure. We first show that in a homogeneous agents economy, the individual hours worked ...

In practice, Free Trade Agreements (FTAs) vastly outnumber Customs Unions (CUs). Nevertheless, the literature traditionally views CUs as optimal for members because CU members coordinate external tariffs. I show that a dynamic FTA flexibility benefit can help explain the prevalence of FTAs: individual FTA members have the flexibility to form their own future FTAs whereas CU members must jointly...

We develop a general theory for the emergence of minority governments in multiparty parliamentary systems using a bargaining model in the tradition of Baron and Ferejohn, 1989. We show that generically (i.e. except for a set of Lebesgue measure zero in the space of the model’s parameters) minority governments form with strictly positive probability when office utility from cabinet positions is ...