Working Papers, University of California, Department of Economics 11,8
We define a generalized state-space model with interactive unawareness and probabilistic beliefs. Such models are desirable for potential applications of asymmetric unawareness. 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-speculative-trade theorem according to which there can not be common certainty of strict preference to trade. Moreover, we prove a generalization of the No-agreeing-to-disagree theorem. Finally, we show the existence of a universal unawareness belief type space.