Tirole (1982) is commonly interpreted as proving that bubbles are impossible with finitely many rational traders with common priors. We study a simple variation of his model in which bubbles can occur, even though traders have common priors and even though it is common knowledge that the asset...

This paper studies the ability of interested parities to communicate private information credibly to a decision maker in settings where their payoffs depend on the decision maker's action, but not on their own information per se. Examples of such situations arise in advertising, corporate...

The purpose of this paper is to provided a simple model in which limited rationality endogenously generates incomplete contracts. I model limited rationality as in Lipman [1991,1992], focusing on the idea that boundedly rational agents do not necessarily know every implication of their...

This paper surveys some recent attempts to formulate a plausible and tractable model of bounded rationality. I focus in particular on models which view bounded rationality as stemming from limited information processing. I discuss computability, partitional models (such as automata, perceptrons,...

It has long been recognized that solving the logical omniscience problem requires using some kind of nonstandard possible worlds. While many such logics have been proposed, none has an obvious claim as the "right" logic to use to describe the reasoning of agents who are not logically omniscient....

wo most popular selling methods -- posted-price selling and auctions -- are compared in this paper. We confirm the common belief that auctions are most often used when the distribution of the object's value is widely dispersed. The choice of selling methods usually depends on the costs of...

This paper examines how a bidder can benefit from jump bidding by using the jump bid as a signal of a high valuation which causes other bidders to drop out of the auction earlier than they would otherwise. The information contained in a jump bid must be sufficient to induce a discrete change in...

A phantom bidding model is analyzed for a sale auction. The following questions are addressed: the effects of phantom bidding on overall social welfare and buyers' profits. It is shown that social welfare may increase or decrease as the auctioneer switches from the fixed reserve price policy to...

We show that small switching costs can have surprisingly dramatic effects in infinitely repeated games if these costs are large relative to payoffs in a single period. This shows that the results in Lipman and Wang [2000] do have analogs in the case of infinitely repeated games. We also discuss...