The standard framework for analyzing games with incomplete information models players as if they form beliefs about their opponents' beliefs about their opponents' beliefs and so on, that is, as if players have an infinite depth of reasoning. This strong assumption has nontrivial implications,...

Behavioral economics provides several motivations for the common observation that agents appear somewhat unwilling to deviate from recent choices: salience, inertia, the formation of habits, the use of rules of thumb, or the locking in on certain modes of behavior due to learning by doing. This...

This paper presents a novel mechanism under which diversity affects performance even if it has no direct impact on payoffs. Diversity matters because it influences the degree of strategic uncertainty that players face. We model this by incorporating the dual process account of Theory of Mind...

We identify a new mechanism through which cultural diversity affects economic outcomes, based on a model of culture as shared cognition. Under this view, cultural diversity matters because it increases strategic uncertainty. The model can help better understand a variety of disparate evidence,...

The value of a game is the payoff a player can expect from playing the game. Wecharacterize how the value of a coordination game depends on the economic environment.The central insight is that players face two types of coordination problems: (1) How tocoordinate on a Nash equilibrium (i.e.,...

The standard framework for analyzing games with incomplete information models players as if they have an infinite depth of reasoning. This paper generalizes the type spaces of Harsanyi (1967-1968) so that players can have a finite depth of reasoning. The innovation is that players can have a...