Transaction costs are omnipresent in markets yet are often omitted in economic models. We show that their presence can fundamentally alter incentives and welfare in markets in which the price equates supply and demand. We categorize transaction costs into two types. Asymptotically...

We consider a game between several principals and a common agent, where principals know only a subset of the agent's available actions. Principals demand robustness and evaluate contracts on a worst-case basis. This robust approach allows for a crisp characterization of the equilibrium contracts...

The allocation of a co-owned company to a single owner using the Texas Shoot-Out mechanism with private valuations is investigated. We identify Knightian Uncertainty about the peer's distribution as the reason for its deterrent effect of an immature dissolving. Modeling uncertainty by a compact...

In symmetric binary-choice coordination games, the global-game selection (GGS) has been proven to predict a high proportion of observed choices correctly. In these games, the GGS is identical to the best response to Laplacian beliefs about the fraction of players choosing either action. This...

In competitive settings, disparities in player strength are common. It is intuitively unclear whether a stronger player would opt for larger or smaller effort compared to weaker players. Larger effort could leverage their strength, while lower effort might be justified by their higher...

The theory of games against nature relies on complete preferences among all conceivable acts (case 1). Aumann and Drèze (Am Econ J Microecon 1(1):116,(2009) consider situations where preferences are defined only for a given set of acts (case 2).We extend these results to situations where (i)...

If a decision maker, in a world of uncertainty à la Anscombe and Aumann (1963), can choose acts according to some objective probability distribution (by throwing dice for instance) from any given set of acts, then there is no set of acts that allows an experimenter to test more than the Axiom...

This paper explores three aspects of strategic uncertainty: its relation to risk, predictability of behavior and subjective beliefs of players. In a laboratory experiment we measure subjects? certainty equivalents for three coordination games and one lottery. Behavior in coordination games is...

Parimutuel betting markets are simplified financial markets, and can thus provide a clearer view of pricing issues which are more complicated elsewhere. Though empirical studies generally conclude that the parimutuel betting markets are surprisingly efficient, it is also found that for horses...

Na and Shin (1998) showed that the veil of uncertainty can be conducive to the success of self-enforcing international environmental agreements. Later papers confirmed this negative conclusion about the role of learning. In the light of intensified research efforts worldwide to reduce...