Various \no trade" theorems suggest that rational agents who start from a common prior should not make speculative bets with each other. To support speculation, market microstructure models typically invoke agents with dynamic hedging demands. Thus a \bar bet", a simple bet on a risk-irrelevant topic negotiated in an informal but non-private social context, seems irrational. We might, however, ...

This paper extends the theory of belief functions by introducing new concepts and techniques, allowing to model the situation in which the beliefs held by a rational agent may only be expressed (or are only known) with some imprecision. Central to our approach is the concept of intervalvalued belief structure, defined as a set of belief structures verifying certain constraints. Starting from th...

We study three alternative versions of the Vickrey (1961) auction when bidders have multi-unit demands: Vickrey’s original static sealed-bid auction and two dynamic implementations of the same auction: with and without dropout information reported during the auction (Ausubel, 1997). Although implemented by a weaker a weaker solution concept, behavior in the dynamic Vickrey auction with dropout ...

We investigate cortical learning from the perspective of mechanism design. First, we show that discretizing standard models of neurons and synaptic plasticity leads to rational agents maximizing simple scoring rules. Second, our main result is that the scoring rules are proper, implying that neurons faithfully encode expected utilities in their synaptic weights and encode high-scoring outcomes ...

We present an approach to preferences suitable for agents that base decisions on their beliefs. In our work, agents’ preferences are perceived as a consequence of their beliefs, but at the same time are used to feed the knowledge base with beliefs about preferences. As a result, agents can reason with preferences to hypothesize, explain decisions, and review preferences in face of new informati...

Alternating-offers is the most prominent negotiation protocol for automatic bilateral bargaining. Nevertheless, in most settings it is still not known how two fully rational agents should behave in the protocol. In this paper we study the finite-horizon alternatingoffers protocol under one-sided uncertain deadlines. We make a novel use of backward induction in studying bargaining with uncertain...

Economics revolves around a central character: “economic man.” As historians, we are all familiar with various episodes in the history of this character, and we appreciate his ever-changing aspect even while many of our colleagues in economics think the rational economic agent of neoclassical economics is the same kind of person as Adam Smith’s economic man. The fact that this is a familiar his...

If each member of a group assigns a certain probability to a hypothesis, what probability should the collective as a whole assign? More generally, how should individual probability functions be merged into a single collective one? I investigate this question in case that the individual probability functions are based on different information sets. Under suitable assumptions, I present a simple ...

In this paper we consider a situation where a number of identical myopic agents enter a long term contract with a principal. The actions of the agents cannot be observed, and the principal ooers the agents a payment scheme where payments from the principal to the agents are based on the observable outcome in the corresponding period. Whereas the principal knows the distribution of outcomes, giv...

An interesting problem which has been widely investigated is under what circumstances will a society of rational agents realize some particular stable situations, and whether they satisfy the condition of social efficiency? This will crucially depend on how they interact and what information they have when they interact. For instance, when strategic interactions are modeled as coordination game...