This paper revisits recent empirical research on buyer credulity in arts auctions and auctions for assets in general. We show that elementary results in auction theory can fully account for some stylized facts on asset returns that have been held to suggest that sellers of assets can exploit buyers by providing biased estimates of asset values. We argue that, rather than showing that buyers are...

People exaggerate the extent to which their information is shared with others. I incorporate such information projections into general Bayesian games whereby people wrongly think that if they can condition their strategy on an event, others can as well. In the context of social investment, the model predicts that a player misattributes behavior that is due to di¤erences in information to behavi...

We review evidence about how psychological biases affect investor behavior and prices. Systematic mispricing probably causes substantial resource misallocation. We argue that limited attention and overconfidence cause investor credulity about the strategic incentives of informed market participants. However, individuals as political participants remain subject to the biases and self-interest th...

This is an author produced version of a paper published in Synthese. This paper has been peer-reviewed but does not include the final publisher proof-corrections or journal pagination. ABSTRACT The assumption that we largely lack reasons for accepting testimony has dominated its epistemology. Given the further assumption that whatever reasons we do have are insufficient to justify our testimoni...

In this note we investigate the infringement (entry) decision for a firm facing an incumbent patent holder with uncertain patent rights. The entrant risks a dispute by entering, resulting in either a settlement (licensing) or litigation and trial. Using the litigation model described by Priest and Klein, we investigate the expected dispute resolution and its impacts on the entrant’s pre-dispute...

Johnson-Laird and coworkers’ Mental Model theory of propositional reasoning is shown to be somewhere in between what logicians have defined as “credulous” and “skeptical” with respect to the conclusions it draws on default reasoning problems. It is then argued that in situations where skeptical reasoning has been shown to lead to problematic conclusions due to not being skeptical enough, the bo...