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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. Halpern, Joseph Y. & Rego, Leandro Chaves, 2008. "Interactive unawareness revisited," Games and Economic Behavior, Elsevier, vol. 62(1), pages 232-262, January.
  2. Aviad Heifetz & Martin Meier & Burkhard C. Schipper, 2005. "A Canonical Model for Interactive Unawareness," Bonn Econ Discussion Papers bgse23_2005, University of Bonn, Germany.
  3. Meier, Martin & Schipper, Burkhard C, 2010. "Speculative Trade under Unawareness: The Infinite Case," MPRA Paper 20632, University Library of Munich, Germany.
  4. 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.
  5. Rubinstein, Ariel, 1991. "Comments on the Interpretation of Game Theory," Econometrica, Econometric Society, vol. 59(4), pages 909-24, July.
  6. 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.
  7. Heifetz, Aviad & Meier, Martin & Schipper, Burkhard C., 2005. "Interactive Unawareness," Discussion Paper Series of SFB/TR 15 Governance and the Efficiency of Economic Systems 52, Free University of Berlin, Humboldt University of Berlin, University of Bonn, University of Mannheim, University of Munich.
  8. Grant, Simon & Quiggin, John, 2012. "Inductive Reasoning About Unwareness," Risk and Sustainable Management Group Working Papers 151202, University of Queensland, School of Economics.
  9. Galanis, Spyros, 2007. "Unawareness of theorems," Discussion Paper Series In Economics And Econometrics 51816, Economics Division, School of Social Sciences, University of Southampton.
  10. 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.
  11. Oliver Board, 2008. "Object-Based Unawareness: Theory and Applications," Working Papers 378, University of Pittsburgh, Department of Economics, revised Mar 2009.
  12. Halpern, Joseph Y., 2001. "Alternative Semantics for Unawareness," Games and Economic Behavior, Elsevier, vol. 37(2), pages 321-339, November.
  13. Blume, Lawrence & Easley, David & Halpern, Joseph Y., 2009. "Constructive Decision Theory," Economics Series 246, Institute for Advanced Studies.
  14. David S. Ahn & Haluk Ergin, 2010. "Framing Contingencies," Econometrica, Econometric Society, vol. 78(2), pages 655-695, 03.
  15. 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.
  16. Li, Jing, 2009. "Information structures with unawareness," Journal of Economic Theory, Elsevier, vol. 144(3), pages 977-993, May.
  17. Schipper, Burkhard C, 2011. "Preference-Based Unawareness," MPRA Paper 30221, University Library of Munich, Germany.
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Cited by:
  1. Auster, Sarah, 2013. "Asymmetric awareness and moral hazard," Games and Economic Behavior, Elsevier, vol. 82(C), pages 503-521.
  2. Schipper, Burkhard C, 2011. "Preference-Based Unawareness," MPRA Paper 30221, University Library of Munich, Germany.
  3. Edi Karni & Marie-Louise Vier�, 2012. ""Reverse Bayesianism": A Choice-Based Theory of Growing Awareness," Economics Working Paper Archive 591, The Johns Hopkins University,Department of Economics.

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