This paper proposes a general incomplete information framework for studying behavior in strategic games with stepwise (viz. `level-k' or `cognitive hierarchy') thinking, which has been found to describe strategic behavior well in experiments involving players' initial responses to games. It is...

Loss aversion is one of the most robust findings to have emerged from behavioral economics. Surprisingly little attention, however, has been devoted to nominal loss aversion, the interaction of loss aversion and money illusion. People tend to think of transactions in terms of their nominal...