We study the optimal dynamic torture scheme offered to an informed victim by a principal who cannot commit. We interpret the principal as the representative member of society (political leader, median voter etc.). We show that an arbitrarily long torture scheme is extremely costly to the...

We offer a theory of the sunk cost fallacy as an optimal response to limited memory. As new information arrives, a decision-maker may not remember all the reasons he began a project. The sunk cost gives additional information about future profits and informs subsequent decisions. The Concorde...

We build a game-theoretic model where aggression can be triggered by domestic political concerns as well as the fear of being attacked. In the model, leaders of full and limited democracies risk losing power if they do not stand up to threats from abroad. In addition, the leader of a fully...

We offer a theory of polarization as an optimal response to ambiguity. Suppose individual A's beliefs first-order stochastically dominate individual B's. They observe a common signal. They exhibit polarization if A's posterior dominates her prior and B's prior dominates her posterior. Given...

A principal must decide whether or not to implement a project which originated with one of her employees. The employees have private information about the quality of the project. A successfully implemented project raises the inventor's chance of promotion, at his peer's expense, but a failed...

We argue that when externalities such as pollution are nonexcludable, agents must be compelled to participate in a "mechanism" to ensure a Pareto-efficient outcome. We survey some of the main findings of the mechanism-design (implementation-theory) literature -- such as the Nash implementation...