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Introspective unawareness and observable choice

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  • Piermont, Evan

Abstract

This paper explores the behavior of a decision maker (DM) who is unaware of some of the options available to her. The DM has a preference over consumption alternatives that is informed by her epistemic state: what she knows and what she is aware of. The main result is a characterization, via observable choice, of introspective unawareness—a DM who is both unaware of some information and aware she is unaware. Under dynamic introspective unawareness, the DM is unwilling to commit to future choices, even when given the flexibility to write a contingent plan that executes a choice conditional on the realization of uncertain events. This is a behavior that cannot be explained by uncertainty alone (i.e., without appealing to unawareness). In a simple strategic environment, the acknowledgment of unawareness can lead to strategic concealment of choice objects (i.e., actions), in turn, leading to a desire for incomplete contracts.

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  • Piermont, Evan, 2017. "Introspective unawareness and observable choice," Games and Economic Behavior, Elsevier, vol. 106(C), pages 134-152.
    • Handle: RePEc:eee:gamebe:v:106:y:2017:i:c:p:134-152
    DOI: 10.1016/j.geb.2017.09.008
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    Citations

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    Cited by:

    1. Vierø, Marie-Louise, 2021. "An intertemporal model of growing awareness," Journal of Economic Theory, Elsevier, vol. 197(C).
    2. Evan Piermont & Peio Zuazo-Garin, 2020. "Failures of Contingent Thinking," Papers 2007.07703, arXiv.org, revised Jul 2023.
    3. Evan Piermont, 2023. "Iterated Revelation: How to Incentive Experts to Complete Incomplete Contracts," Papers 2304.05142, arXiv.org, revised Mar 2024.
    4. Auster, Sarah & Pavoni, Nicola, 2024. "Optimal delegation and information transmission under limited awareness," Theoretical Economics, Econometric Society, vol. 19(1), January.
    5. Scott Condie & Lars Stentoft & Marie-Louise Vierø, 2023. "Unawareness Premia," Economics Working Papers 2023-09, Department of Economics and Business Economics, Aarhus University.
    6. 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.
    7. Katarina Kostelić, 2023. "Implications of (un)awareness for decision-making in strategic interaction: another take on the Prisoner’s dilemma," DECISION: Official Journal of the Indian Institute of Management Calcutta, Springer;Indian Institute of Management Calcutta, vol. 50(2), pages 251-268, June.
    8. Grant Simon & Guerdjikova Ani & Quiggin John, 2021. "Ambiguity and Awareness: A Coherent Multiple Priors Model," The B.E. Journal of Theoretical Economics, De Gruyter, vol. 21(2), pages 571-612, June.
    9. Adam Dominiak & Ani Guerdjikova, 2021. "Pessimism and optimism towards new discoveries," Theory and Decision, Springer, vol. 90(3), pages 321-370, May.

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    More about this item

    Keywords

    Unawareness; Uncertainty; Epistemic preferences; Dynamic choice;
    All these keywords.

    JEL classification:

    • D01 - Microeconomics - - General - - - Microeconomic Behavior: Underlying Principles
    • 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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