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Unawareness, Beliefs and Speculative Trade

Author

Listed:
  • Aviad Heifetz
  • Martin Meier
  • Burkhard C. Schipper

    (Department of Economics, University of California Davis)

Abstract

We define a generalized state-space model with interactive unawareness and probabilistic beliefs. Such models are desirable for potential applications of asymmetric unawareness. We compare unawareness with probability zero belief. 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-trade"" theorem according to which there can not be common certainty of strict preference to trade. Moreover, we show a generalization of the ""No-agreeing-to-disagree"" theorem.

Suggested Citation

  • Aviad Heifetz & Martin Meier & Burkhard C. Schipper, 2009. "Unawareness, Beliefs and Speculative Trade," Working Papers 920, University of California, Davis, Department of Economics.
  • Handle: RePEc:cda:wpaper:09-20
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    References listed on IDEAS

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    1. Heifetz, Aviad & Meier, Martin & Schipper, Burkhard C., 2013. "Dynamic unawareness and rationalizable behavior," Games and Economic Behavior, Elsevier, vol. 81(C), pages 50-68.
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    Citations

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    Cited by:

    1. Spyros Galanis, 2013. "Unawareness of theorems," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 52(1), pages 41-73, January.
    2. Liu, Zhen, 2016. "Games with incomplete information when players are partially aware of others’ signals," Journal of Mathematical Economics, Elsevier, vol. 65(C), pages 58-70.
    3. Schumacher, Heiner & Thysen, Heidi, 2017. "Equilibrium Contracts and Boundedly Rational Expectations," Annual Conference 2017 (Vienna): Alternative Structures for Money and Banking 168085, Verein für Socialpolitik / German Economic Association.
    4. Martin Meier & Burkhard C. Schipper, 2014. "Speculative trade under unawareness: the infinite case," Economic Theory Bulletin, Springer;Society for the Advancement of Economic Theory (SAET), vol. 2(2), pages 147-160, October.
    5. repec:kap:theord:v:83:y:2017:i:2:d:10.1007_s11238-017-9594-z is not listed on IDEAS
    6. Burkhard Schipper, 2010. "Revealed Unawareness," Working Papers 105, University of California, Davis, Department of Economics.
    7. Burkhard C. Schipper & Oliver Board & Kim-Sau Chung, 2009. "Two Models of Unawareness: Comparing the object-based and subjective-state-space approaches," Working Papers 93, University of California, Davis, Department of Economics.
    8. Heifetz, Aviad & Kets, Willemien, 2018. "Robust multiplicity with a grain of naiveté," Theoretical Economics, Econometric Society, vol. 13(1), January.
    9. 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.
    10. Heinsalu, Sander, 2014. "Universal type structures with unawareness," Games and Economic Behavior, Elsevier, vol. 83(C), pages 255-266.
    11. 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.
    12. repec:eee:gamebe:v:109:y:2018:i:c:p:598-615 is not listed on IDEAS
    13. Antoine Dubus, 2017. "Asymmetric Awareness and Heterogeneous Agents," Working Papers hal-01521487, HAL.
    14. Galanis, Spyros, 2016. "The value of information in risk-sharing environments with unawareness," Games and Economic Behavior, Elsevier, vol. 97(C), pages 1-18.
    15. repec:eee:apmaco:v:313:y:2017:i:c:p:313-320 is not listed on IDEAS
    16. Auster, Sarah, 2013. "Asymmetric awareness and moral hazard," Games and Economic Behavior, Elsevier, vol. 82(C), pages 503-521.
    17. Schipper, Burkhard C, 2011. "Preference-Based Unawareness," MPRA Paper 30221, University Library of Munich, Germany.
    18. Martin Meier & Burkhard Schipper, 2014. "Bayesian games with unawareness and unawareness perfection," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 56(2), pages 219-249, June.
    19. Mikaël Cozic, 2016. "Probabilistic Unawareness," Games, MDPI, Open Access Journal, vol. 7(4), pages 1-24, November.
    20. repec:eee:matsoc:v:87:y:2017:i:c:p:11-21 is not listed on IDEAS
    21. Sarah Auster, 2011. "Asymmetric Awareness and Moral Hazard," Economics Working Papers ECO2011/, European University Institute.
    22. Tarbush, Bassel, 2016. "Counterfactuals in “agreeing to disagree” type results," Mathematical Social Sciences, Elsevier, vol. 84(C), pages 125-133.
    23. repec:pit:wpaper:379 is not listed on IDEAS

    More about this item

    Keywords

    unawareness; awareness; zero probability; type-space; common prior; agreement; speculative trade; interactive epistemology;

    JEL classification:

    • C70 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - General
    • C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games
    • D80 - Microeconomics - - Information, Knowledge, and Uncertainty - - - General
    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design

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