This paper explains why seemingly irrational overconfident behavior can persist. Information aggregation is poor in groups in which most individuals herd. By ignoring the herd, the actions of overconfident individuals ("entrepreneurs") convey their private information. However, entrepreneurs...

This paper provides an evolutionary foundation for our capacity to attribute preferences to others. This ability is intrinsic to game theory, and is a key component of "Theory of Mind", perhaps the capstone of social cognition. We argue here that this component of theory of mind allows organisms...

This paper investigates the evolutionary foundation for our capacity to attribute preferences to others. This ability is intrinsic to game theory, and is a key component of "Theory of Mind," perhaps the capstone of social cognition. We argue here that this component of theory of mind allows...

A general and practical competitive market model for trading indivisible goods is introduced. There are a group of buyers and a group of sellers, and several indivisible goods. Each buyer is initially endowed with a sufficient amount of money and each seller is endowed with several units of each...

The competitive market structure of a decentralized economy is converted into a self-policing system treating the bureaucracy and enforcement of the legal system endogenously. In particular we consider money systems as constructs to make agents' economic strategies predictable from knowledge of...

We study markets in which agents first make investments and are then matched into potentially productive partnerships. Equilibrium investments and the equilibrium matching will be efficient if agents can simultaneously negotiate investments and matches, but we focus on markets in which agents...

In a previous essay we modeled the enforcement of contract, and through it the provision of money and markets, as a production function within the society, the scale of which is optimized endogenously by labor allocation away from primary production of goods. Government and a central bank...

We study games with strategic complementarities, arbitrary numbers of players and actions, and slightly noisy payoff signals. We prove limit uniqueness: as the signal noise vanishes, the game has a unique strategy profile that survives iterative dominance. This generalizes a result of Carlsson...

The classical Fisher equation asserts that in a nonstochastic economy, the inflation rate must equal the difference between the nominal and real interest rates. We extend this equation to a representative agent economy with real uncertainty in which the central bank sets the nominal rate of...

We construct explicit equilibria for strategic market games used to model an economy with fiat money, one nondurable commodity, countably many time- periods, and a continuum of agents. The total production of the commodity is a random variable that fluctuates from period to period. In each...