A Note on Unawareness and Zero Probability
AbstractI study how choice behavior given unawareness of an event differs from choice behavior given subjective belief of zero probability on that event. Depending on different types of unawareness the decision-maker suffers, behavior under unawareness is either incomparable with that under zero probability (in the case of pure unawareness), or drastically different (in the case of partial unawareness). The key differences are (1) partial unawareness permits dynamically inconsistent choice, while zero probability beliefs do not; and (2) there are unforeseen options in an unawareness environment that are necessarily modeled as dominated options in zero probability models.
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Bibliographic InfoPaper provided by Penn Institute for Economic Research, Department of Economics, University of Pennsylvania in its series PIER Working Paper Archive with number 08-022.
Length: 18 pages
Date of creation: 02 Jan 2008
Date of revision:
unawareness; zero probability; dynamic consistency; unforeseen contingency; unforeseen options;
Find related papers by JEL classification:
- C70 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - General
- C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games
- D80 - Microeconomics - - Information, Knowledge, and Uncertainty - - - General
- D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
- D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search, Learning, and Information
This paper has been announced in the following NEP Reports:
- NEP-ALL-2008-07-05 (All new papers)
- NEP-GTH-2008-07-05 (Game Theory)
- NEP-UPT-2008-07-05 (Utility Models & Prospect Theory)
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