We study the evolution of strategic psychological capabilities in a population of interacting agents. Specifically,we consider agentswhich are either blind orwithmindsight, and either transparent or opaque. An agent with mindsight can observe the psychological makeup of a transparent agent,...

The paper clarifies how sunk costs can lead a rational incumbent to innovate less than an entrant. It also demonstrates that competition among incumbents yields less adoption of new and more efficient production technology than competition which includes entrants. The results suggest that policy...

We theoretically explore the risk-taking behavior of two unequally-endowed risk-neutral agents who are presented with opportunities to play lotteries. We find that if the agents consider rank in the wealth distribution more important than wealth itself, then their risk preferences are distorted...

Why are humans so vulnerable to pain in interpersonal relations and can so easily hurt others physically and emotionally? We theoretically examine whether being offensively strong but defensively weak can evolve as a strategic trait that fosters cooperation. We study a population comprised of...

A parsimonious model is used to explore the risk-bearing decision under a payoff structure that emphasizes relative performance. Equilibrium betting amounts are derived for players who start with unequal endowments and face a lottery that offers either a positive or negative expected return. If...

An outside inventor of a new production process seeks to license it to Cournot duopolists which have unequal ex ante costs. Distinguishing "leading-edge" innovations (new cost below both firms' costs) from "catch-up" innovations (new cost between the two firms' costs), we compare the equilibria...

Competition among profit-seeking firms in an oligopolistic industry inherently generates incentives for firms to commit to maximize a performance metric other than profit. We briefly review the underlying theory, analyze its ramifications in a Cournot duopoly, and consider feasibility...