Many social interactions require humans to coordinate their behavior across a range of scales. However, aspects of intentional coordination remain puzzling from within several approaches in cognitive science. Sketching a new perspective, we propose that the complex behavioral patterns - or 'unwritten rules' - governing such coordination emerge from an ongoing process of 'virtual bargaining'. Social participants behave on the basis of what they would agree to do if they were explicitly to bargain, provided the agreement that would arise from such discussion is commonly known. Although intuitively simple, this interpretation has implications for understanding a broad spectrum of social, economic, and cultural phenomena (including joint action, team reasoning, communication, and language) that, we argue, depend fundamentally on the virtual bargains themselves.

The paper uses data from Armenia to test the implications of remittance flows on behavior of receiving households. We find that remittance-receiving households work fewer hours and spend less on the education of their children. While saving more, these households are not leveraging their savings to borrow from the banking system to expand their business activities. This evidence suggests that the benefits of remittances might be overstated and emphasizes the importance of measuring their impact in a general-rather than a partial-equilibrium context.

Abstract. How do firms manage to collude without communicating? Why do we find more collusion in price competition than in quantity competition? Why is collusion so hard to detect? We examine strategic behavior in competitive interactions by developing and applying the concept of virtual bargaining. When decision makers virtually bargain, they mentally simulate, and choose among, agreements that they could reach if they were able to explicitly negotiate with each other. Virtual bargainers focus on agreements that offer some protection against the possibility that their counterparts may deviate and best respond to these agreements. We develop a formal account of virtual bargaining and demonstrate that it leads to collusion in Bertrand, but not in Cournot, competition. In this framework, collusion is a result of virtual bargaining as a mode of reasoning and requires neither communication nor dynamic considerations, such as rewards and punishments, between the players.History: Accepted by Manel Baucells, decision analysis.

Social interaction is both ubiquitous and central to understanding human behavior. Such interactions depend, we argue, on shared intentionality: the parties must form a common understanding of an ambiguous interaction (e.g., one person giving a present to another requires that both parties appreciate that a voluntary transfer of ownership is intended). Yet how can shared intentionality arise? Many well-known accounts of social cognition, including those involving "mind-reading," typically fall into circularity and/or regress. For example, A's beliefs and behavior may depend on her prediction of B's beliefs and behavior, but B's beliefs and behavior depend in turn on her prediction of A's beliefs and behavior. One possibility is to embrace circularity and take shared intentionality as imposing consistency conditions on beliefs and behavior, but typically there are many possible solutions and no clear criteria for choosing between them. We argue that addressing these challenges requires some form of we-reasoning, but that this raises the puzzle of how the collective agent (the "we") arises from the individual agents. This puzzle can be solved by proposing that the will of the collective agent arises from a simulated process of bargaining: agents must infer what they would agree, were they able to communicate. This model explains how, and which, shared intentions are formed. We also propose that such "virtual bargaining" may be fundamental to understanding social interactions.

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