We study a model where agents face a continuum of two-player games and categorize them into a finite number of situations to make sense of their complex environment. Each agent can cooperate or defect, conditional on the perceived category. Agents may not share the same categorization. The games...

We study a model where agents face a continuum of two-player games and categorize them into a finite number of situations to make sense of their complex environment. Agents need not share the same categorization. Each agent can cooperate or defect, conditional on the perceived category. The...

We study strategic interaction between agents who distill the complex world around them into simpler situations. Assuming agents share the same cognitive frame, we show how the frame affects equilibrium outcomes. In one-shot and repeated interactions, the frame causes agents to be either better...