The subjective framework for reasoning is extended to incorporate the representation of unawareness in games. Both unawareness of actions and decision makers are modeled as well as reasoning about others’ unawareness. It is shown that a small grain of uncertainty about unawareness with rational decision makers can lead to cooperation in the finitely repeated prisoner’s dilemma. JEL Classificati...

This paper presents a framework for applying prediction markets to corporate decision making. The analysis is motivated by the recent surge of interest in markets as information aggregation devices and their potential use within firms. We characterize the amount of outcome manipulation that results in equilibrium and the impact of this manipulation on market prices. (JEL: D71, D82, D83, D84)

We prove the existence of a private value allocation for an economy with differential information where the commodity space may be infinite dimensional, and there is a continuum of states. We also discuss the existence, non-existence, and properties of two alternative value allocation concepts. JEL classification: D8; D82; C7; C71; C72

We compare the behavior of car mechanics and college students as sellers in experimental credence goods markets. Finding largely similar behavior, we note much more overtreatment by car mechanics, probably due to decision heuristics they learned in their professional training. JEL classifications: C91, D82, C72

I show that a unique equilibrium exists in an asymmetric two-player all-pay auction with a discrete signal structure, correlated signals, and interdependent valuations. The proof is constructive, and the construction can be implemented as a computer program and be used to derive comparative statics. I also characterize the set of equilibria when a reserve price is introduced. JEL Classification...

This note demonstrates that symmetric 3× 3 supermodular games may fail to have any equilibrium robust to incomplete information. Since the global game solution in these games is known to be independent of the noise structure, our result implies that a noise-independent selection in global games may not be a robust equilibrium. Journal of Economic Literature Classification Numbers: C72, D82.

We study the speed of social learning, when two players learn from private signals as well as the actions of the other. Our main finding is that increased interaction between the agents can lower the rate of learning: learning is significantly slower when both players observe each other, than when one only observes the other. JEL classifications: C73, D82, D83

Two agents sequentially contracts with different principals under moral hazard. If agents care for one another, the second principal gains by insuring them over first wages. Even with independent tasks, the first principal must offer riskier payments to induce effort. JEL Codes: D10, D64, D82.

We compare the behavior of car mechanics and college students as sellers in experimental credence goods markets. Finding largely similar behavior, we note much more overtreatment by car mechanics, probably due to decision heuristics they learned in their professional training. JEL classifications: C91, D82, C72

Players have privacy concerns that may affect their choice of actions in strategic settings. We use a variant of signaling games to model this effect and study its relation to pooling behavior, misrepresentation of information, and inefficiency. JEL Classification: C72, D82