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Introduction: Understanding Strategic Behavior 1

Bibliographic Notes 4

1 Simultaneous Decisionmaking and the Normal Form Game 6

The Normal Form Game 6

Using Different Games to Compare Legal Regimes 14

The Nash Equilibrium 19

Civil Liability, Accident Law, and Strategic Behavior 24

Legal Rules and the Idea of Strict Dominance 28

Collective Action Problems and the Two-by-Two Game 31

The Problem of Multiple Nash Equilibria 35

Summary 46

Bibliographic Notes 46

2 Dynamic Interaction and the Extensive Form Game 50

The Extensive Form Game and Backwards Induction 50

A Dynamic Model of Preemption and Strategic Commitment 57

Subgame Perfection 63

Summary 75

Bibliographic Notes 77

3 Information Revelation, Disclosure Laws, and Renegotiation 79

Incorporating Beliefs into the Solution Concept 80

The Perfect Bayesian Equilibrium Solution Concept 83

Verifiable Information, Voluntary Disclosure, and the Unraveling Result 89

Disclosure Laws and the Limits of Unraveling 95

Observable Information, Norms, and the Problem of Renegotiation 109

Optimal Incentives and the Need for Renegotiation 112

Limiting the Ability of Parties to Renegotiate 116

Summary 118

Bibliographic Notes 119

4 Signaling, Screening, and Nonverifiable Information 122

Signaling and Screening 122

Modeling Non verifiable Information 125

Signals and the Effects of Legal Rules 142

Information Revelation and Contract Default Rules 147

Screening and the Role of Legal Rules 153

Summary 156

Bibliographic Notes 157

5 Reputation and Repeated Games 159

Backwards Induction and Its Limits 159

Infinitely Repeated Games, Tacit Collusion, and Folk Theorems 165

Reputation, Predation, and Cooperation 178

Summary 186

Bibliographic Notes 186

6 Collective Action, Embedded Games, and the Limits of Simple Models 188

Collective Action and the Role of Law 189

Embedded Games 191

Understanding the Structure of Large Games 195

Collective Action and Private Information 202

Collective Action Problems in Sequential Decisionmaking 208

Herd Behavior 213

Summary 217

Bibliographic Notes 217

7 Noncooperative Bargaining 219

Modeling the Division of Gains from Trade 219

Legal Rules as Exit Options 224

Bargaining and Corporate Reorganizations 232

Collective Bargaining and Exit Options 237

Summary 241

Bibliographic Notes 241

8 Bargaining and Information 244

Basic Models of the Litigation Process 244

Modeling Separate Trials for Liability and Damages 251

Information and Selection Bias 260

Discovery Rules and Verifiable Information 261

Summary 266

Bibliographic Notes 266

Conclusion: Information and the Limits of Law 268

Notes 275

References 289

Glossary 301

Index 319