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An Intertemporal Model Of Growing Awareness

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  • Marie-Louise Vierø

    (Queen's University)

Abstract

This paper presents an intertemporal model of growing awareness. It provides a framework for analyzing problems with long time horizons in the presence of growing awareness and awareness of unawareness. The framework generalizes both the standard event-tree framework and the framework from Karni and Viero (2017) of awareness of unawareness. Axioms and a representation are provided along with a recursive formulation of intertemporal utility. This allows for tractable and consistent analysis of intertemporal problems with unawareness. To illustrate the relevance of growing awareness for dynamic decision making, the model is applied to a representative agent intertemporal asset pricing problem.

Suggested Citation

  • Marie-Louise Vierø, 2017. "An Intertemporal Model Of Growing Awareness," Working Paper 1388, Economics Department, Queen's University.
    • Handle: RePEc:qed:wpaper:1388
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    File URL: https://www.econ.queensu.ca/sites/econ.queensu.ca/files/wpaper/qed_wp_1388.pdf
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    References listed on IDEAS

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    1. Alon, Shiri, 2015. "Worst-case expected utility," Journal of Mathematical Economics, Elsevier, vol. 60(C), pages 43-48.
    2. Simon Grant & John Quiggin, 2013. "Inductive reasoning about unawareness," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 54(3), pages 717-755, November.
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    4. Kochov, Asen, 2018. "A behavioral definition of unforeseen contingencies," Journal of Economic Theory, Elsevier, vol. 175(C), pages 265-290.
    5. Burkhard Schipper, 2013. "Awareness-dependent subjective expected utility," International Journal of Game Theory, Springer;Game Theory Society, vol. 42(3), pages 725-753, August.
    6. Oliver Walker & Simon Dietz, 2011. "A representation result for choice under conscious unawareness," GRI Working Papers 59, Grantham Research Institute on Climate Change and the Environment.
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    9. Karni Edi & Valenzuela-Stookey Quitzé & Vierø Marie-Louise, 2021. "Reverse Bayesianism: A Generalization," The B.E. Journal of Theoretical Economics, De Gruyter, vol. 21(2), pages 557-569, June.
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    11. David Easley & Aldo Rustichini, 1999. "Choice without Beliefs," Econometrica, Econometric Society, vol. 67(5), pages 1157-1184, September.
    12. Edi Karni & Marie-Louise Vierø, 2015. "Probabilistic sophistication and reverse Bayesianism," Journal of Risk and Uncertainty, Springer, vol. 50(3), pages 189-208, June.
    13. Karni, Edi & Vierø, Marie-Louise, 2017. "Awareness of unawareness: A theory of decision making in the face of ignorance," Journal of Economic Theory, Elsevier, vol. 168(C), pages 301-328.
    14. Dietrich, Franz, 2018. "Savage's theorem under changing awareness," Journal of Economic Theory, Elsevier, vol. 176(C), pages 1-54.
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    Cited by:

    1. Marie-Louise Vierø, 2022. "Lost in objective translation: Awareness of unawareness when unknowns are not simply unknowns," Economics Working Papers 2022-06, Department of Economics and Business Economics, Aarhus University.

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    More about this item

    Keywords

    Awareness; Unawareness; Intertemporal Utility; Recursive Utility; Reverse Bayesianism; Asset Pricing;
    All these keywords.

    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; Information and Knowledge; Communication; Belief; Unawareness

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