This paper studies resource-allocation mechanisms by using a reduced-form notion of mechanism. We formulate a mechanism by specifying the state space of the mechanism, the set of outcomes that agents can induce in a given state, and the set of admissible outcomes in each state. This notion of mechanism includes the Walrasian mechanism and majority voting as well as all game forms. With this not...

This paper explores the link between boundedly rational behavior and incomplete contracts. The bounded rationality of the agents in our world is embodied in a constraint that the contracts they write must be algorithmic in nature. We start with a definition of contract incompleteness that seems both appealing and widely applicable. Our first task is then to show that, by itself, the algorithmic...

This paper suggests a theory of choice among strategic situations when the rules of play are not properly specified. We take the view that a “strategic situation” is adequately described by a TU game since it specifies what is feasible for each coalition but is silent on the procedures that are used to allocate the surplus. We model the choice problem facing a decision maker (DM) as having to c...

We analyze how customers with limited attention value and choose among health plans. We show how the model can accommodate four observations regarding plan choice. First, people tend to overweight the premium and thus underappreciate the value of health insurance. Second, insurance companies may have a strong incentive to reduce quality and to hide these shortcomings in the ne print while attra...

in this article,we briefly analyse cognitive science and cognitive economics. generally, there are two main theories related to cognitive science and brain performance models. first theory which are inspired by computer and artifical intelligence and second the connectionist models. the connectionist theory is the most prevalent in cognitive science now. hayek and north ,the two nobel laureates...

This paper examines an equilibrium model of social memory — a society’s vicarious beliefs about its past. We show that incorrect social memory is a key ingredient in creating and perpetuating destructive conflicts. We analyze an infinite-horizon model in which two countries face off each period in a game of conflict characterized by the possibility of mutually destructive “all out war” that yie...