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Unawareness, beliefs, and speculative trade

  • Heifetz, Aviad
  • Meier, Martin
  • Schipper, Burkhard C.

We define a generalized state-space model with interactive unawareness and probabilistic beliefs. Such models are desirable for potential applications of asymmetric unawareness. Applying our unawareness belief structures, we show that the common prior assumption is too weak to rule out speculative trade in all states. Yet, we prove a generalized “No-speculative-trade” theorem according to which there cannot be common certainty of strict preference to trade. Moreover, we prove a generalization of the “No-agreeing-to-disagree” theorem.

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Article provided by Elsevier in its journal Games and Economic Behavior.

Volume (Year): 77 (2013)
Issue (Month): 1 ()
Pages: 100-121

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Handle: RePEc:eee:gamebe:v:77:y:2013:i:1:p:100-121
DOI: 10.1016/j.geb.2012.09.003
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