Recent literature has established a link between the fully cursed equilibrium and the analogy-based expectation equilibrium. In this note, even the partially cursed equilibrium is shown to correspond to an analogy-based expectation equilibrium.

We build a simple formal model of governance. Investments and control rights over assets and labor are fully contractible, but final production decisions are ex ante uncontractible, and ex post negotiations are inefficient. If sunk costs are low, suppliers own assets and trade takes the form of...

Received wisdom holds that income rank matters for life satisfaction, but causal evidence on the nature and impact of income comparisons is limited. We randomize individuals from a representative sample of mid-career Finns to receive personal rank information from one of several reference...

Experiments suggest that communication increases the contribution to public goods (Ledyard, 1995). There is also evidence that, when contemplating a lie, people trade off their private benefit from the lie with the harm it inflicts on others (Gneezy, 2005). We develop a model of bilateral...

We argue that anticorruption laws may provide an efficiency rationale for why political parties should meddle in the distribution of political nominations and government contracts. Anticorruption laws forbid trade in spoils that politicians distribute. However, citizens may pay for gaining...

In line with the widely applied principle of just deserts, we assume that the severity of the penalty on a contract offender increases in the harm on the other. When this principle holds, the influence of the efficiency of the agreement on the incentives to abide by it crucially depends on...

Recent literature has questioned the existence of a learning foundation for the partially cursed equilibrium. This paper closes the gap by showing that a partially cursed equilibrium corresponds to a particular analogy-based expectation equilibrium.

We consider guilt averse agents and principals and study the effects of guilt on optimal behavior of the principal and the agent in a moral hazard model. The principal’s contract proposal contains a target effort in addition to the monetary incentive scheme. By accepting the agreement,...

Can two negotiators fail to agree when both the size of the surplus and the rationality of the negotiators are common knowledge? We show that the answer is affrmative. When the negotiators can make irrevocable commitments at a low but positive cost, the unique symmetric equilibrium entails...

In line with the widely applied principle of just deserts, we assume that the severity of the penalty on a contract offender increases in the harm on the other. When this principle holds, the influence of the efficiency of the agreement on the incentives to abide by it crucially depends on...