We argue that the notion of Pareto dominance is not as compelling in the presence of uncertainty as it is under certainty. In particular, voluntary trade based on differences in tastes is commonly accepted as desirable, because tastes cannot be wrong. By contrast, voluntary trade based on...

We formulate a notion of stable outcomes in matching problems with one‐sided asymmetric information. The key conceptual problem is to formulate a notion of a blocking pair that takes account of the inferences that the uninformed agent might make. We show that the set of stable outcomes is...

There is a tension between a belief in the strategic relevance of information sets and subgames and a belief in the sufficiency of the reduced normal form. The authors identify a prope rty of extensive form information sets and subgames termed strategic independence. Strategic independence is...

Preferences exhibit relative consumption effects if a person's satisfaction with their own consumption appears to depend upon how much others are consuming. This paper examines a model of an evolutionary environment in which Nature optimally builds relative consumption effects into preferences...

We study the long-run sustainability of reputations in games with imperfect public monitoring. It is impossible to maintain a permanent reputation for playing a strategy that does not play an equilibrium of the game without uncertainty about types. Thus, a player cannot indefinitely sustain a...