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"Reverse Bayesianism": A Choice-Based Theory of Growing Awareness

  • Edi Karni
  • Marie-Louise Vier�

This paper invokes the axiomatic approach to explore the notion of growing awareness in the context of decision making under uncertainty. It introduces a new approach to modeling the expanding universe of a decision maker in the wake of becoming aware of new consequences, new acts, and new links between acts and consequences. New consequences or new acts represent genuine expansions of the decision maker's universe, while the discovery of new links between acts and consequences renders nonnull events that were considered null before the discovery. The expanding universe, or state space, is accompanied by extension of the set of acts. The preference relations over the expanding sets of acts are linked by a new axiom, dubbed act independence, which is motivated by the idea that decision makers have unchanging preferences over the satisfaction of basic needs. The main results are representation theorems and corresponding rules for updating beliefs over expanding state spaces and null events that have the flavor of "reverse Bayesianism".

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Paper provided by The Johns Hopkins University,Department of Economics in its series Economics Working Paper Archive with number 591.

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Date of creation: Mar 2012
Date of revision:
Handle: RePEc:jhu:papers:591
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  1. Heifetz, Aviad & Meier, Martin & Schipper, Burkhard C., 2006. "Interactive unawareness," Journal of Economic Theory, Elsevier, vol. 130(1), pages 78-94, September.
  2. Eddie Dekel & Barton L. Lipman & Aldo Rustichini, 1998. "Standard State-Space Models Preclude Unawareness," Econometrica, Econometric Society, vol. 66(1), pages 159-174, January.
  3. Burkhard Schipper, 2011. "Awareness-Dependent Subjective Expected Utility," Working Papers 1022, University of California, Davis, Department of Economics.
  4. Simon Grant & John Quiggin, 2009. "Inductive reasoning about unawareness," Risk & Uncertainty Working Papers WPR09_1, Risk and Sustainable Management Group, University of Queensland.
  5. repec:cup:cbooks:9780521517324 is not listed on IDEAS
  6. Joseph Y. Halpern, 2000. "Alternative Semantics for Unawareness," Game Theory and Information 0004010, EconWPA.
  7. Li, Jing, 2009. "Information structures with unawareness," Journal of Economic Theory, Elsevier, vol. 144(3), pages 977-993, May.
  8. Modica, Salvatore & Rustichini, Aldo, 1999. "Unawareness and Partitional Information Structures," Games and Economic Behavior, Elsevier, vol. 27(2), pages 265-298, May.
  9. Halpern, Joseph Y. & Rego, Leandro Chaves, 2008. "Interactive unawareness revisited," Games and Economic Behavior, Elsevier, vol. 62(1), pages 232-262, January.
  10. repec:cup:cbooks:9780521741231 is not listed on IDEAS
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