We find an economic rationale for the common sense answer to the question in our title - courts should not always enforce what the contracting parties write. We describe and analyze a contractual environment that allows a role for an active court. An active court can improve on the outcome that...

We describe and analyze a contractual environment that allows a role for an active court. The model we analyze is the same as in Anderlini, Felli, and Postlewaite (2006). An active court can improve on the outcome that the parties would achieve without it. The institutional role of the court is...

We find an economic rationale for the common sense answer to the question in our title - courts should not always enforce what the contracting parties write. We describe and analyze a contractual environment that allows a role for an active court. An active court can improve on the outcome that...

We study economies with multiple assets that are valued both for their return and liquidity. Exchange occurs in decentralized markets with frictions making a medium of exchange essential. Some assets are better suited for this role because they are more liquid - more likely to be accepted in...

The art of rhetoric may be defined as changing other people’s minds (opinions, beliefs) without providing them new information. One technique heavily used by rhetoric employs analogies. Using analogies, one may draw the listener’s attention to similarities between cases and to re-organize...

There is a large repeated games literature illustrating how future interactions provide incentives for cooperation. Much of the earlier literature assumes public monitoring. Departures from public monitoring to private monitoring that incorporate differences in players’ observations may...

We propose a formal model of scientific modeling, geared to applications of decision theory and game theory. The model highlights the freedom that modelers have in conceptualizing social phenomena using general paradigms in these fields. It may shed some light on the distinctions between (i)...

Much of the literature on mechanism design and implementation uses the revelation principle to restrict attention to direct mechanisms. This is without loss of generality in a well defined sense. It is, however, restrictive if one is concerned with the set of equilibria, if one is concerned...

We showed in McLean and Postlewaite (2014) that when agents are informationally small, there exist small modifications to VCG mechanisms in interdependent value problems that restore incentive compatibility. This paper presents a two-stage mechanism that similarly restores incentive...

Maximizing subjective expected utility is the classic model of decision making under uncertainty. Savage (1954) provides axioms on preference over acts that are equivalent to the existence of a subjective expected utility representation, and further establishes that such a representation is...