Theories can be produced by experts seeking a reputation for having knowledge. Hence, a tester could anticipate that theories may have been strategically produced by uninformed experts who want to pass an empirical test. We show that, with no restriction on the domain of permissible theories,...

We prove the perfect-monitoring folk theorem continues to hold when attention is restricted to strategies with bounded recall and the equilibrium is essentially required to be strict. As a consequence, the perfect monitoring folk theorem is shown to be behaviorally robust under almost-perfect...

The difficulties in properly anticipating key economic variables may encourage decision makers to rely on experts’ forecasts. Professional forecasters, however, may not be reliable and so their forecasts must be empirically tested. This may induce experts to forecast strategically in order to...

A strategy profile in a repeated game has L bounded recall if play under the profile after two distinct histories that agree in the last L periods is equal. Mailath and Morris (2002, 2006) proved that any strict equilibrium in bounded-recall strategies of a game with full support public...

We examine the fundamental concept of Popper’s falsifiability within an economic model in which a tester hires a potential expert to produce a theory. Payments are made contingent on the performance of the theory vis-a-vis future realizations of the data. We show that if experts are strategic,...

This paper introduces a model of endogenous network formation and systemic risk. In it, strategic agents form networks that efficiently trade-off the possibility of systemic risk with the benefits of trade. Efficiency is a consequence of the high risk of contagion which forces agents to...

This paper introduces a model of endogenous network formation and systemic risk. In it, agents form networks that efficiently trade-off the possibility of systemic risk with the benefits of trade. Second, fundamentally ‘safer’ economies generate higher interconnectedness, which in turn leads...

The problem of allocating bundles of indivisible objects without transfers arises in the assignment of courses to students, of computing resources like CPU time, memory and disk space to computing tasks and the truck loads of food to food banks. In these settings the complementarities in...

The National Resident Matching program strives for a stable matching of medical students to teaching hospitals. With the presence of couples, stable matchings need not exist. For any student preferences, we show that each instance of a stable matching problem has a ’nearby’ instance with a...