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Title:Unawareness, Beliefs and Games PDF Logo
Authors:Heifetz, Aviad
Meier, Martin
Schipper, Burkhard C.
Issue Date:2007
Series/Report no.:Bonn econ discussion papers 2007,6
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.
Subjects:unawareness
awareness
type-space
Bayesian games
incomplete information
equilibrium
common prior
agreement
speculative trade
JEL:C72
C70
D82
D80
Document Type:Working Paper
Appears in Collections:Bonn Econ Discussion Papers, Bonn Graduate School of Economics (BGSE), Universität Bonn

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