Template-Type: ReDIF-Paper 1.0
Author-Name: Burkhard C. Schipper
Author-Name-First: Burkhard C.
Author-Name-Last: Schipper
Author-Name: Martin Meier
Author-Name-First: Martin
Author-Name-Last: Meier
Author-Name: Aviad Heifetz
Author-Name-First: Aviad
Author-Name-Last: Heifetz
Author-Workplace-Name: Department of Economics, University of California Davis
Title: Unawareness, Beliefs and Games
Abstract: We define a generalized state-space model with interactive unawareness and probabilistic beliefs. Such models are desirable for many potential applications of asymmetric unawareness. We develop Bayesian games with unawareness, define equilibrium, and prove existence. We show how equilibria are extended naturally from lower to higher awareness levels and restricted from higher to lower awareness levels. We use our unawareness belief structure to 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.
Length: 44
File-URL: https://repec.dss.ucdavis.edu/files/nfcaKrx42vjHZJwjjZJ2rrxr/07-3.pdf
File-Format: application/pdf
Number: 235
Classification-JEL: C70, C72, D80, D82
KeyWords: unawareness, awareness, type-space, Bayesian games,incomplete information, equilibrium, common prior, agreement, speculative trade, interactive epistemology.
Creation-Date: 20070228
Handle: RePEc:cda:wpaper:235