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Object-based unawareness: Theory and applications

Author

Listed:
  • Oliver J. Board

    (Paul | Weiss, USA)

  • Kim-Sau Chung

    (Department of Economics, Hong Kong Baptist University, China)

Abstract

In this paper and its companion paper, Board and Chung (2021), we provide foundations for a model of unawareness that can be used to distinguish between what an agent is unaware of and what she simply does not know. At an informal level, this distinction plays a key role in a number of recent papers such as Tirole (2009) and Chung and Fortnow (2007). Here we provide a set-theoretic (i.e., non-linguistic) version of our framework. We use our object-based unawareness structures to investigate two applications. The first application provides a justification for the contra proferentem doctrine of contract interpretation, under which ambiguous terms in a contract are construed against the drafter. Our second application examines speculative trade.

Suggested Citation

  • Oliver J. Board & Kim-Sau Chung, 2022. "Object-based unawareness: Theory and applications," The Journal of Mechanism and Institution Design, Society for the Promotion of Mechanism and Institution Design, University of York, vol. 7(1), pages 1-43, December.
    • Handle: RePEc:jmi:articl:jmi-v7i1a1
    DOI: 10.22574/jmid.2022.12.001
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    References listed on IDEAS

    as
    1. Jean Tirole, 2009. "Cognition and Incomplete Contracts," American Economic Review, American Economic Association, vol. 99(1), pages 265-294, March.
    2. Morris, Stephen, 1995. "The Common Prior Assumption in Economic Theory," Economics and Philosophy, Cambridge University Press, vol. 11(2), pages 227-253, October.
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    4. Heifetz, Aviad & Meier, Martin & Schipper, Burkhard C., 2013. "Unawareness, beliefs, and speculative trade," Games and Economic Behavior, Elsevier, vol. 77(1), pages 100-121.
    5. Filiz-Ozbay, Emel, 2012. "Incorporating unawareness into contract theory," Games and Economic Behavior, Elsevier, vol. 76(1), pages 181-194.
    6. Oliver J. Board & Kim-Sau Chung, 2021. "Object-based unawareness: Axioms," The Journal of Mechanism and Institution Design, Society for the Promotion of Mechanism and Institution Design, University of York, vol. 6(1), pages 1-36, December.
    7. Heifetz, Aviad & Meier, Martin & Schipper, Burkhard C., 2006. "Interactive unawareness," Journal of Economic Theory, Elsevier, vol. 130(1), pages 78-94, September.
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    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    Unawareness; legal doctrine; no-trade theorem.;
    All these keywords.

    JEL classification:

    • D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search; Learning; Information and Knowledge; Communication; Belief; Unawareness
    • D86 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Economics of Contract Law
    • D91 - Microeconomics - - Micro-Based Behavioral Economics - - - Role and Effects of Psychological, Emotional, Social, and Cognitive Factors on Decision Making
    • K12 - Law and Economics - - Basic Areas of Law - - - Contract Law

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