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A behavioral definition of unforeseen contingencies

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  • Kochov, Asen

Abstract

The paper proposes a choice-theoretic definition of an unforeseen event and a model of behavior that accommodates such events. The analysis presumes an individual who is aware of their unawareness, which explains why all unforeseen events in this paper are non-null. Relative to existing work, the main contribution is to establish a distinction between unforeseen events and events whose likelihood is ambiguous. This is achieved by adopting a dynamic choice setting.

Suggested Citation

  • Kochov, Asen, 2018. "A behavioral definition of unforeseen contingencies," Journal of Economic Theory, Elsevier, vol. 175(C), pages 265-290.
    • Handle: RePEc:eee:jetheo:v:175:y:2018:i:c:p:265-290
    DOI: 10.1016/j.jet.2018.01.018
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    References listed on IDEAS

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    Cited by:

    1. Minardi, Stefania & Savochkin, Andrei, 2019. "Subjective contingencies and limited Bayesian updating," Journal of Economic Theory, Elsevier, vol. 183(C), pages 1-45.
    2. Auster, Sarah & Kettering, Jeremy & Kochov, Asen, 2024. "Sequential trading with coarse contingencies," Journal of Economic Theory, Elsevier, vol. 220(C).
    3. Saponara, Nick, 2022. "Revealed reasoning," Journal of Economic Theory, Elsevier, vol. 199(C).
    4. Vierø, Marie-Louise, 2021. "An intertemporal model of growing awareness," Journal of Economic Theory, Elsevier, vol. 197(C).
    5. Chollete, Lorán & Jaffee, Dwight & Mamun, Khawaja A., 2022. "Policy suggestions from a simple framework with extreme outcomes," International Review of Economics & Finance, Elsevier, vol. 82(C), pages 374-398.
    6. Burkhard C. Schipper, 2024. "Predicting the Unpredictable under Subjective Expected Utility," Papers 2403.01421, arXiv.org.
    7. Fukuda, Satoshi, 2021. "Unawareness without AU Introspection," Journal of Mathematical Economics, Elsevier, vol. 94(C).
    8. Anastasia Burkovskaya, 2022. "A model of state aggregation," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 73(1), pages 121-149, February.
    9. Evan Piermont & Peio Zuazo-Garin, 2020. "Failures of Contingent Thinking," Papers 2007.07703, arXiv.org, revised Jul 2023.
    10. Andrew Ellis & Michele Piccione, 2017. "Correlation Misperception in Choice," American Economic Review, American Economic Association, vol. 107(4), pages 1264-1292, April.
    11. Scott Condie & Lars Stentoft & Marie-Louise Vierø, 2023. "Unawareness Premia," Economics Working Papers 2023-09, Department of Economics and Business Economics, Aarhus University.
    12. Marie-Louise Vierø, 2022. "Lost in objective translation: Awareness of unawareness when unknowns are not simply unknowns," Economics Working Papers 2022-06, Department of Economics and Business Economics, Aarhus University.
    13. Grant Simon & Guerdjikova Ani & Quiggin John, 2021. "Ambiguity and Awareness: A Coherent Multiple Priors Model," The B.E. Journal of Theoretical Economics, De Gruyter, vol. 21(2), pages 571-612, June.
    14. Adam Dominiak & Ani Guerdjikova, 2021. "Pessimism and optimism towards new discoveries," Theory and Decision, Springer, vol. 90(3), pages 321-370, May.
    15. Simon Grant & Idione Meneghel & Rabee Tourky, 2022. "Learning under unawareness," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 74(2), pages 447-475, September.
    16. Simon Dietz & Falk Niehörster, 2021. "Pricing ambiguity in catastrophe risk insurance," The Geneva Risk and Insurance Review, Palgrave Macmillan;International Association for the Study of Insurance Economics (The Geneva Association), vol. 46(2), pages 112-132, September.
    17. Áron Tóbiás, 2023. "Cognitive limits and preferences for information," Decisions in Economics and Finance, Springer;Associazione per la Matematica, vol. 46(1), pages 221-253, June.
    18. Lorán Chollete & Sharon G. Harrison, 2021. "Unintended Consequences: Ambiguity Neglect and Policy Ineffectiveness," Eastern Economic Journal, Palgrave Macmillan;Eastern Economic Association, vol. 47(2), pages 206-226, April.
    19. Andrew Ellis & Heidi Christina Thysen, 2021. "Subjective Causality in Choice," Papers 2106.05957, arXiv.org, revised Dec 2022.

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    More about this item

    Keywords

    Dynamic choice; Unforeseen events; Ambiguity aversion;
    All these keywords.

    JEL classification:

    • D15 - Microeconomics - - Household Behavior - - - Intertemporal Household Choice; Life Cycle Models and Saving
    • D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty
    • D84 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Expectations; Speculations

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