The great recession (2008) triggered an apparent discrepancy between empirical findings and macroeconomic models based on rational expectations alone. This gap led to a series of recent developments of a behavioral microfoundation of macroeconomics combined with the underlying experimental and...

Many experiments have shown that human subjects do not necessarily behave in line with game theoretic assumptions and solution concepts. The reasons for this non-conformity are multiple. In this paper we study the argument whether a deviation from game theory is because subjects are rational,...

The mathematical framework of psychological game theory is useful for describing many forms of motivation where preferences depend directly on own or others’ beliefs. It allows for incorporating, e.g., emotions, reciprocity, image concerns, and self-esteem in economic analysis. We explain how...