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Awareness of unawareness: A theory of decision making in the face of ignorance

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  • Karni, Edi
  • Vierø, Marie-Louise

Abstract

In the wake of growing awareness, decision makers anticipate that they might acquire knowledge that, in their current state of ignorance, is unimaginable. Supposedly, this anticipation manifests itself in the decision makers' choice behavior. In this paper we model the anticipation of growing awareness, lay choice-based axiomatic foundations to a subjective expected utility representation of beliefs about the likelihood of discovering unknown consequences, and assign utility to consequences that are not only unimaginable but may also be nonexistent. In so doing, we maintain the flavor of reverse Bayesianism of Karni and Vierø (2013, 2015).

Suggested Citation

  • 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.
  • Handle: RePEc:eee:jetheo:v:168:y:2017:i:c:p:301-328 DOI: 10.1016/j.jet.2016.12.011
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    Cited by:

    1. repec:kap:theord:v:83:y:2017:i:2:d:10.1007_s11238-017-9594-z is not listed on IDEAS
    2. repec:spr:joecth:v:63:y:2017:i:4:d:10.1007_s00199-016-0972-5 is not listed on IDEAS
    3. Marie-Louise Viero, 2017. "An intertemporal model of growing awareness," Working Papers 1388, Queen's University, Department of Economics.
    4. Emanuele Borgonovo & Veronica Cappelli & Fabio Maccheroni & Massimo Marinacci, 2016. "Model Uncertainty in Risk Analysis and Decision Theory: A Preliminary Investigation," Working Papers 592, IGIER (Innocenzo Gasparini Institute for Economic Research), Bocconi University.
    5. Dietrich, Franz, 2016. "Savage's Theorem Under Changing Awareness," MPRA Paper 71306, University Library of Munich, Germany.
    6. repec:eee:ejores:v:264:y:2018:i:1:p:280-293 is not listed on IDEAS
    7. Wenjun Ma & Burkhard C. Schipper, 2017. "Does exposure to unawareness affect risk preferences? A preliminary result," Theory and Decision, Springer, vol. 83(2), pages 245-257, August.
    8. Pierpaolo Battigalli & Simone Cerreia-Vioglio & Fabio Maccheroni & Massimo Marinacci, 2017. "Mixed extensions of decision problems under uncertainty," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), pages 827-866.
    9. repec:eee:mateco:v:71:y:2017:i:c:p:63-73 is not listed on IDEAS

    More about this item

    Keywords

    Awareness; Unawareness; Ignorance; Reverse Bayesianism; Utility of indescribable consequences;

    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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