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Awareness-Dependent Subjective Expected Utility

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  • Burkhard Schipper

    (Department of Economics, University of California Davis)

Abstract

We develop awareness-dependent subjective expected utility by taking unawareness structures introduced in Heifetz, Meier, and Schipper (2006, 2008, 2011a) as primitives in the Anscombe-Aumann approach to subjective expected utility. We observe that a decision maker is unaware of an event if and only if her choices reveal that the event is ``null'' and the negation of the event is ``null''. Moreover, we characterize ``impersonal'' expected utility that is behaviorally indistinguishable from awareness-dependent subject expected utility and assigns probability zero to some subsets of states that are not necessarily events. We discuss in what sense probability zero can model unawareness.

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Bibliographic Info

Paper provided by University of California, Davis, Department of Economics in its series Working Papers with number 1022.

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Length: 27
Date of creation: 21 Dec 2011
Date of revision:
Handle: RePEc:cda:wpaper:10-22

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Related research

Keywords: unawareness; awareness; unforeseen contingencies; null; probability zero; subjective probability; Anscombe-Aumann; small worlds;

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References

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  1. Galanis, Spyros, 2007. "Unawareness of theorems," Discussion Paper Series In Economics And Econometrics 51816, Economics Division, School of Social Sciences, University of Southampton.
  2. Rubinstein, Ariel, 1991. "Comments on the Interpretation of Game Theory," Econometrica, Econometric Society, vol. 59(4), pages 909-24, July.
  3. Jing Li, 2008. "A Note on Unawareness and Zero Probability," PIER Working Paper Archive 08-022, Penn Institute for Economic Research, Department of Economics, University of Pennsylvania.
  4. Oliver Board, 2008. "Object-Based Unawareness: Theory and Applications," Working Papers 378, University of Pittsburgh, Department of Economics, revised Mar 2009.
  5. Simon Grant & John Quiggin, 2009. "Inductive reasoning about unawareness," Risk & Uncertainty Working Papers WPR09_1, Risk and Sustainable Management Group, University of Queensland.
  6. Li, Jing, 2009. "Information structures with unawareness," Journal of Economic Theory, Elsevier, vol. 144(3), pages 977-993, May.
  7. Morris, Stephen, 1996. "The Logic of Belief and Belief Change: A Decision Theoretic Approach," Journal of Economic Theory, Elsevier, vol. 69(1), pages 1-23, April.
  8. Heifetz, Aviad & Meier, Martin & Schipper, Burkhard C., 2008. "A canonical model for interactive unawareness," Games and Economic Behavior, Elsevier, vol. 62(1), pages 304-324, January.
  9. HEIFETZ, Aviad & MEIER, Martin & SCHIPPER, Burkhard C., 2004. "Interactive unawareness," CORE Discussion Papers 2004059, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
  10. Blume, Lawrence & Easley, David & Halpern, Joseph Y., 2009. "Constructive Decision Theory," Economics Series 246, Institute for Advanced Studies.
  11. Joseph Y. Halpern, 2000. "Alternative Semantics for Unawareness," Game Theory and Information 0004010, EconWPA.
  12. Martin Meier & Burkhard C. Schipper, 2013. "Speculative Trade under Unawareness: The Infinite Case," Working Papers 102, University of California, Davis, Department of Economics.
  13. Halpern, Joseph Y. & Rego, Leandro Chaves, 2008. "Interactive unawareness revisited," Games and Economic Behavior, Elsevier, vol. 62(1), pages 232-262, January.
  14. Schipper, Burkhard C, 2011. "Preference-Based Unawareness," MPRA Paper 30221, University Library of Munich, Germany.
  15. Oliver Board & Kim-Sau Chung & Burkhard C. Schipper, 2008. "Two Models of Unawareness," Working Papers 379, University of Pittsburgh, Department of Economics, revised Mar 2009.
  16. David S. Ahn & Haluk Ergin, 2010. "Framing Contingencies," Econometrica, Econometric Society, vol. 78(2), pages 655-695, 03.
  17. Heinsalu, Sander, 2012. "Equivalence of the information structure with unawareness to the logic of awareness," Journal of Economic Theory, Elsevier, vol. 147(6), pages 2453-2468.
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Citations

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Cited by:
  1. Martin Meier & Burkhard Schipper, 2014. "Bayesian games with unawareness and unawareness perfection," Economic Theory, Springer, vol. 56(2), pages 219-249, June.
  2. Ekaterina Svetlova & Henk van Elst, 2014. "Decision-theoretic approaches to non-knowledge in economics," Papers 1407.0787, arXiv.org.
  3. Edi Karni & Marie-Louise Vier?, 2013. ""Reverse Bayesianism": A Choice-Based Theory of Growing Awareness," American Economic Review, American Economic Association, vol. 103(7), pages 2790-2810, December.
  4. Auster, Sarah, 2013. "Asymmetric awareness and moral hazard," Games and Economic Behavior, Elsevier, vol. 82(C), pages 503-521.
  5. Schipper, Burkhard C, 2011. "Preference-Based Unawareness," MPRA Paper 30221, University Library of Munich, Germany.

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