IDEAS home Printed from https://ideas.repec.org/p/stn/sotoec/1313.html
   My bibliography  Save this paper

Trade and the value of information under unawareness

Author

Listed:
  • Galanis, Spyros

Abstract

The value of information and the possibility of speculation are examined in an environment with unawareness. Although agents have “correct†prior beliefs about events they are aware of and have a clear understanding of their available actions and payoffs, their unawareness may lead them to commit information processing errors and to behave suboptimally. As a result, more information is not always valuable and agents can speculate with each other. We identify two specific information processing errors that are responsible for both problems. Moreover, we construct a dynamic model where agents announce their posteriors and update their awareness as soon as they hear a counterfactual announcement. We study how awareness is updated and whether agreement about posteriors is reached.

Suggested Citation

  • Galanis, Spyros, 2013. "Trade and the value of information under unawareness," Discussion Paper Series In Economics And Econometrics 1313, Economics Division, School of Social Sciences, University of Southampton.
  • Handle: RePEc:stn:sotoec:1313
    as

    Download full text from publisher

    File URL: https://eprints.soton.ac.uk/155621/1/1313%2520combined.pdf
    Download Restriction: no

    References listed on IDEAS

    as
    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. Samet, Dov, 1998. "Common Priors and Separation of Convex Sets," Games and Economic Behavior, Elsevier, vol. 24(1-2), pages 172-174, July.
    3. Ng, Man-Chung, 2003. "On the duality between prior beliefs and trading demands," Journal of Economic Theory, Elsevier, vol. 109(1), pages 39-51, March.
    4. Kim-Sau Chung & Oliver Board, 2007. "Object-Based Unawareness," Working Papers 2007-2, University of Minnesota, Department of Economics, revised 24 Aug 2007.
    5. repec:pit:wpaper:245 is not listed on IDEAS
    6. Giacomo Bonanno & Klaus Nehring, "undated". "Fundamental Agreement: A New Foundation For The Harsanyi Doctrine," Department of Economics 96-02, California Davis - Department of Economics.
    7. Heifetz, Aviad & Meier, Martin & Schipper, Burkhard C., 2006. "Interactive unawareness," Journal of Economic Theory, Elsevier, vol. 130(1), pages 78-94, September.
    8. Modica, Salvatore & Rustichini, Aldo, 1999. "Unawareness and Partitional Information Structures," Games and Economic Behavior, Elsevier, vol. 27(2), pages 265-298, May.
    9. Geanakoplos, John D. & Polemarchakis, Heraklis M., 1982. "We can't disagree forever," Journal of Economic Theory, Elsevier, vol. 28(1), pages 192-200, October.
    10. Morris, Stephen, 1994. "Trade with Heterogeneous Prior Beliefs and Asymmetric Information," Econometrica, Econometric Society, vol. 62(6), pages 1327-1347, November.
    11. Halpern, Joseph Y., 2001. "Alternative Semantics for Unawareness," Games and Economic Behavior, Elsevier, vol. 37(2), pages 321-339, November.
    12. Feinberg, Yossi, 2004. "Subjective Reasoning--Games with Unawareness," Research Papers 1875, Stanford University, Graduate School of Business.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    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. Heifetz, Aviad & Meier, Martin & Schipper, Burkhard C., 2013. "Unawareness, beliefs, and speculative trade," Games and Economic Behavior, Elsevier, vol. 77(1), pages 100-121.
    3. 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.
    4. Spyros Galanis, 2011. "Syntactic foundations for unawareness of theorems," Theory and Decision, Springer, vol. 71(4), pages 593-614, October.

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:stn:sotoec:1313. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Chris Thorn). General contact details of provider: http://edirc.repec.org/data/desotuk.html .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.