Aviad Heifetz (The Economics and Management Department, The Open University of Israel. aviadhe@openu.ac.il) Martin Meier (Instituto de Analisis Economico - CSIC, Barcelona. Email: martin.meier@uab.es) Burkhard C. Schipper (Department of Economics, University of California, Davis. bcschipper@ucdavis.edu)
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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.
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Paper provided by SFB/TR 15 Governance and the Efficiency of Economic Systems, Free University of Berlin, Humboldt University of Berlin, University of Bonn, University of Mannheim, University of Munich in its series Discussion Papers with number
196.
Schipper, Burkhard & Heifetz, Aviad & Meier, Martin, 2007.
"Unawareness, Beliefs and Games,"
Working Papers
07-3, University of California at Davis, Department of Economics.
[Downloadable!]
Find related papers by JEL classification: C70 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - General C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games D80 - Microeconomics - - Information, Knowledge, and Uncertainty - - - General D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information
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References listed on IDEAS Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
Aviad Heifetz & Martin Meier & Burkhard C. Schipper, 2007.
"Unawareness, Beliefs and Games,"
Discussion Papers
196, SFB/TR 15 Governance and the Efficiency of Economic Systems, Free University of Berlin, Humboldt University of Berlin, University of Bonn, University of Mannheim, University of Munich.
[Downloadable!]
Other versions:
Schipper, Burkhard & Heifetz, Aviad & Meier, Martin, 2007.
"Unawareness, Beliefs and Games,"
Working Papers
07-3, University of California at Davis, Department of Economics.
[Downloadable!]
Cited by: (explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)
Aviad Heifetz & Martin Meier & Burkhard C. Schipper, 2007.
"Unawareness, Beliefs and Games,"
Discussion Papers
196, SFB/TR 15 Governance and the Efficiency of Economic Systems, Free University of Berlin, Humboldt University of Berlin, University of Bonn, University of Mannheim, University of Munich.
[Downloadable!]
Schipper, Burkhard & Heifetz, Aviad & Meier, Martin, 2007.
"Unawareness, Beliefs and Games,"
Working Papers
07-3, University of California at Davis, Department of Economics.
[Downloadable!]