Motivated by classical decision-theoretic paradoxes (Allais 1953, Ellsberg 1961), we introduce a projective generalization of expected utility along the lines of the quantum-mechanical generalization of probability theory. The resulting decision theory accommodates the paradoxes, while retaining significant simplicity and tractability. In particular, every finite game within this larger class of preferences still has an equilibrium.

This paper introduces a new class of mechanisms based on negotiation between market participants. This model allows us to circumvent Myerson and Satterthwaite's impossibility result and present a bilateral market mechanism that is efficient, individually rational, incentive compatible, and budget balanced in the single-unit heterogeneous setting. The underlying scheme makes this combination of desirable qualities possible by reporting a price range for each buyer-seller pair that defines a zone of possible agreements, while the final price is left open for negotiation.

We introduce an axiomatic approach to the problem of inferring a complete and transitive weak ordering representing the agent's preferences given a set of observed constraints. The axioms characterize a unique inference rule, which amounts to the constrained maximization of a certain formula we derive. The formula can be interpreted as the entropy of the agent's preference ordering, and its unique maximand identifies the simplest rationalization of the observed behavior.