Reputation mechanisms offer an efficient way of building the necessary level of trust in electronic markets. In the absence of independent verification authorities that can reveal the true outcome of a transaction, market designers have to insure that it is in the best interest of the trading agents to report the behavior in transactions truthfully. As opposed to side-payment schemes that corre...

We develop a model to study the role of individual rationality in economics and biology. The model’s agents differ continuously in their ability to make rational choices. The agents’ objective is to ensure their individual survival over time or, equivalently, to maximize profits. In equilibrium, however, individually rational agents who maximize their objective survival probability are, individ...

I show how uncertainty about fundamentals can cause delay in bargaining when agents have reputational concerns. Agents’ publicly observable costs of delay change stochastically at some revelation time. In addition to rational agents, there are behavioral types committed to many different fixed demands. I show that even when the probability of behavioral types is arbitrarily small, agreement may...

Rational expectations models make stringent assumptions on the agent’s knowledge about the true model. This paper introduces a model in which the rational agent realizes that using a given model involves approximation errors, and adjusts behavior accordingly. If the researcher accounts for this empirical rationality on part of the agent, the resulting empirical model assigns likelihood to the d...

A rational agent derives its choice of action from its beliefs and goals. Goals can be distinguished into achievement goals and maintenance goals. The aim of this paper is to define a mechanism which ensures the satisfaction of maintenance goals. We argue that such a mechanism requires the agent to look ahead, in order to make sure that the execution of actions does not lead to a violation of a...

Mechanism design theory strongly relies on the concept of Nash equilibrium. However, studies of experimental games show that Nash equilibria are rarely played and that subjects may be thinking only a finite number of iterations. We study one of the most influential benchmarks of mechanism design theory, the expected externality mechanism (D’Aspremont, GerardVaret, 1979) in a finite-depth enviro...

Probabilism is committed to two theses: 1) Opinion comes in degrees—call them degrees of belief, or credences. 2) The degrees of belief of a rational agent obey the probability calculus. Correspondingly, a natural way to argue for probabilism is: i) to give an account of what degrees of belief are,

We study the behaviour of rational agents in exchange protocols which rely on trustees. We allow malicious parties to compromise the trustee by paying a cost and, thereby, present a game analysis that advocates exchange protocols which induce balanced risks on the participants. We also present a risk-balanced protocol for fair confidential secret comparison.

Surveys are frequently used by businesses and governments to elicit information about the public’s preferences. They have become the most common way to gather preference information regarding goods, that are not (or are not yet) bought or sold in markets. In this paper we apply the standard neoclassical economic framework to generate predictions about how rational agents would answer such surve...

We consider a resource allocation problem, where a rational agent has to decide how to share a limited amount of resources among different companies that might be facing financial difficulties. The objective is to minimize the total long term cost incurred by the economy due to default events. Using the framework of multiarmed restless bandits and, assuming a two-state evolution of the default ...