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Abstract

This paper introduces a new approach to modeling the expanding universe of decision makers in the wake of growing awareness, and invokes the axiomatic approach to model the evolution of decision makers' beliefs as awareness grows. The expanding universe is accompanied by extension of the set of acts, the preference relations over which are linked by a new axiom, invariant risk preferences, asserting that the ranking of lotteries is independent of the set of acts under consideration. The main results are representation theorems and rules for updating beliefs over expanding state spaces and null events that have the flavor of "reverse Bayesianism."

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File URL: http://www.econ.queensu.ca/working_papers/papers/qed_wp_1258.pdf
File Function: First version 2010
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Bibliographic Info

Paper provided by Queen's University, Department of Economics in its series Working Papers with number 1258.

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Length: 26 pages
Date of creation: Dec 2010
Date of revision:
Handle: RePEc:qed:wpaper:1258

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Related research

Keywords: Awareness; unawareness; reverse Bayesianism; null events;

Find related papers by JEL classification:

• D8 - Microeconomics - - Information, Knowledge, and Uncertainty
• D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty
• D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search, Learning, and Information

This paper has been announced in the following NEP Reports:

• NEP-ALL-2011-01-30 (All new papers)
• NEP-MIC-2011-01-30 (Microeconomics)
• NEP-UPT-2011-01-30 (Utility Models & Prospect Theory)

References

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1. Schipper, Burkhard, 2010. "Revealed Unawareness," Working Papers 10-5, University of California at Davis, Department of Economics.
   
   • Burkhard Schipper, 2010. "Revealed Unawareness," Working Papers 105, University of California, Davis, Department of Economics.
   • Schipper, Burkhard C, 2010. "Revealed Unawareness," MPRA Paper 21491, University Library of Munich, Germany.
2. Heifetz, Aviad & Meier, Martin & Schipper, Burkhard C., 2006. "Interactive unawareness," Journal of Economic Theory, Elsevier, vol. 130(1), pages 78-94, September.
   
   • 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).
   • 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.
3. Joseph Y. Halpern, 2000. "Alternative Semantics for Unawareness," Game Theory and Information 0004010, EconWPA.
   
   • Halpern, Joseph Y., 2001. "Alternative Semantics for Unawareness," Games and Economic Behavior, Elsevier, vol. 37(2), pages 321-339, November.
4. Li, Jing, 2009. "Information structures with unawareness," Journal of Economic Theory, Elsevier, vol. 144(3), pages 977-993, May.
5. Eddie Dekel & Barton L. Lipman & Aldo Rustichini, 1998. "Standard State-Space Models Preclude Unawareness," Econometrica, Econometric Society, vol. 66(1), pages 159-174, January.
6. Halpern, Joseph Y. & Rego, Leandro Chaves, 2008. "Interactive unawareness revisited," Games and Economic Behavior, Elsevier, vol. 62(1), pages 232-262, January.
7. Modica, Salvatore & Rustichini, Aldo, 1999. "Unawareness and Partitional Information Structures," Games and Economic Behavior, Elsevier, vol. 27(2), pages 265-298, May.

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