Previous research has established that the predictions made by game theory about strategic behavior in incomplete information games are quite sensitive to the assumptions made about the players' infinite hierarchies of beliefs. We evaluate the severity of this robustness problem by...

We consider abstract exchange mechanisms wherein individuals submit "diversified" offers in m commodities, which are then redistributed to them. Our first result is that if the mechanism satisfies certain natural conditions embodying "fairness" and "convenience" then it admits unique prices, in...

This paper solves for the set of equilibrium payoffs in bargaining with interdependent values when the informed party makes all offers, as discounting vanishes. The seller of a good is informed of its quality, which affects both his cost and the buyer's valuation, but the buyer is not. To...

We consider mechanisms that provide traders the opportunity to exchange commodity i for commodity j, for certain ordered pairs ij. Given any connected graph G of opportunities, we show that there is a unique mechanism M_G that satisfies some natural conditions of "fairness" and "convenience."...

Although evidence accrues in biology, anthropology and experimental economics that homo sapiens is a cooperative species, the reigning assumption in economic theory is that individuals optimize in an autarkic manner (as in Nash and Walrasian equilibrium). I here postulate a cooperative kind of...

Status is greatly valued in the real world, yet it has not received much attention from economic theorists. We examine how the owner of a firm can best combine money and status together to get his employees to work hard for the least total cost. We find that he should motivate workers of low...

Although evidence accrues in biology, anthropology and experimental economics that homo sapiens is a cooperative species, the reigning assumption in economic theory is that individuals optimize in an autarkic manner (as in Nash and Walrasian equilibrium). I here postulate an interdependent kind...

Consider agents who undertake costly effort to produce stochastic outputs observable by a principal. The principal can award a prize deterministically to the agent with the highest output, or to all of them with probabilities that are proportional to their outputs. We show that, if there is...

We show that if students care primarily about their status (relative rank) in class, they are best motivated to work not by revealing their exact numerical exam scores (100,99,...,1), but instead by clumping them in broad categories (A,B,C). If their abilities are disparate, the optimal grading...

The random priority (random serial dictatorship) mechanism is a common method for assigning objects to individuals. The mechanism is easy to implement and strategy-proof. However this mechanism is inefficient, as the agents may be made all better off by another mechanism that increases their...