This paper reports laboratory data for games that are played only once. These games span the standard categories: static and dynamic games with complete and incomplete information. For each game, the treasure is a treatment in which behavior conforms nicely to predictions of the Nash equilibrium or relevant refinement. In each case, however, a change in the payoff structure produces a large inconsistency between theoretical predictions and observed behavior. These contradictions are generally consistent with simple intuition based on the interaction of payoff asymmetries and noisy introspection about others’ decisions.

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this paper is on procedures whereby new (e.g., juvenile) members of a population could learn to communicate with the other members by observing their communicative behavior. Two apparently distinct issues are relevant to the evaluation of such learning procedures. First, the procedure must enable the new members to accurately acquire the communication system of the population, even though their observations may be limited, noisy, or otherwise misleading. Second, the learning procedure used by its new members will affect the population's communication system over time. The use of a particular procedure might result in the population's communication increasing in coordination, ultimately yielding a nearly optimally coordinated system. If a learning procedure were to satisfy both criteria, it could explain how learned communication systems are maintained over time, as well as how they are established in the first place.

This paper explains why some firms prefer to pay dividends rather than repurchase shares. When institutional investors are relatively less taxed than individual investors, dividends induce "ownership clientele" effects. Firms paying dividends attract relatively more institutions, which have a relative advantage in detecting high firm quality and in ensuring firms are well managed. The theory is consistent with some documented regularities, specifically both the presence and stickiness of dividends, and offers novel empirical implications, e.g., a prediction that it is the tax difference between institutions and retail investors that determines dividend payments, not the absolute tax payments.

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This paper investigates the role of campaign advertising and the opportunity of legal restrictions on it. An electoral race is modeled as a signalling game with three classes of players: many voters, two candidates, and one interest group. The group has non-verifiable insider information on the candidates ’ quality and, on the basis of this information, offers a contribution to each candidate in exchange for a favorable policy position. Candidates spend the contributions they receive on non-directly informative advertising. This paper shows that: (1) A separating equilibrium exists in which the group contributes to a candidate only if the insider information about that candidate is positive; (2) Although voters are fully rational, a ban on campaign advertising can be welfare-improving; and (3) Split contributions may arise in equilibrium (and, if they arise too often, they are detrimental to voters).

The paper analyzes repeated contract negotiations involving the same buyer and seller where the contracts are linked because the buyer has persistent (but not fully permanent) private information. (The main application is labor contracts, where the employer has private information about the value of labor services sold by the union). The size of the surplus being divided is specified as a two-state Markov chain with transitions that are synchronized with contract negotiation dates. Equilibrium involves information cycles triggered by the success or failure of aggressive demands made by the seller. A successful demand induces the seller to again make an aggressive demand in the next negotiation, because the buyer’s acceptance reveals that the current surplus is large, and because there is persistence in the Markov chain generating the surplus. Rejection of an aggressive demand, on the other hand, leads the seller to be pessimistic about the size of the surplus in the next contract, so the seller makes a "soft " offer that is sure to be accepted. Then, several contracts later, the Markov chain has made enough transitions to make the seller optimistic enough to again make an aggressive demand, and the result of this demand re-starts the information cycle. An interesting feature of this cycle is that the soft price is not constant, but declines as the cycle continues, so as to offset the buyer’s option value of re-starting the cycle when the current state is bad. An explicit

The epistemic program in game theory uses formal models of interactive reasoning to provide foundations for various game-theoretic solution concepts. Much of this work is based around the (static) Aumann structure model of interactive epistemology, but more recently dynamic models of interactive reasoning have been developed, most notably by Stalnaker [Econ. Philos. 12 (1996) 133– 163] and Battigalli and Siniscalchi [J. Econ. Theory 88 (1999) 188–230], and used to analyze rational play in extensive form games. But while the properties of Aumann structures are well understood, without a formal language in which belief and belief revision statements can be expressed, it is unclear exactly what are the properties of these dynamic models. Here we investigate this question by defining such a language. A semantics and syntax are presented, with soundness and completeness theorems linking the two.

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