Unawareness, beliefs, and speculative trade

Aviad Heifetz; Martin Meier; Burkhard C. Schipper

doi:10.1016/j.geb.2012.09.003

Unawareness, beliefs, and speculative trade

Aviad Heifetz, Martin Meier, Burkhard C. Schipper

Economics discipline

Research output: Contribution to journal › Article › peer-review

Abstract

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 cannot be common certainty of strict preference to trade. Moreover, we prove a generalization of the "No-agreeing-to-disagree" theorem.

Original language	English
Pages (from-to)	100-121
Number of pages	22
Journal	Games and Economic Behavior
Volume	77
Issue number	1
DOIs	https://doi.org/10.1016/j.geb.2012.09.003
State	Published - Jan 2013

Bibliographical note

Funding Information:
✩ Aviad acknowledges support from the Open University of Israel, Research Grant No. 46106. Martin acknowledges financial support from the Spanish Ministerio de Educación y Ciencia via a Ramon y Cajal Fellowship and under grant ECO2009-12695 as well as from the Fundación Ramón Areces. Burkhard received financial support from the NSF SES-0647811, DFG SFB/TR 15, Minerva Stiftung, and IGA-UCD. We thank two anonymous referees, Leandro Chaves Rêgo, Eddie Dekel, Enrique Kawamura, Li Jing, Salvatore Modica, Klaus Nehring and participants in the Workshop on Unawareness at Stanford University, 2006, NASEM 2006, LOFT 2006, LAMES 2006, SAET 2007, TARK 2007, Stony Brook 2007, ESEM 2007, NBER GE conference 2007, GAMES 2008, and seminars at Bocconi, Max-Planck Institute of Mathematics in the Sciences in Leipzig, UCLA, St. Louis, Tucson, and Venice for helpful comments. Some of the material was circulated previously as a working paper titled “Unawareness, beliefs and games”. Some of the material circulated in earlier versions of the paper is now contained in Meier and Schipper (2012a) and Heifetz et al. (2011b). * Corresponding author. E-mail addresses: [email protected] (A. Heifetz), [email protected] (M. Meier), [email protected] (B.C. Schipper).

Keywords

Agreement
Awareness
Common prior
Inattention
Interactive epistemology
Speculative trade
Unawareness

Access to Document

10.1016/j.geb.2012.09.003

Cite this

@article{4dfbc92a822c42678355b6f9f74da0f3,

title = "Unawareness, beliefs, and speculative trade",

abstract = "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 cannot be common certainty of strict preference to trade. Moreover, we prove a generalization of the {"}No-agreeing-to-disagree{"} theorem.",

keywords = "Agreement, Awareness, Common prior, Inattention, Interactive epistemology, Speculative trade, Unawareness",

author = "Aviad Heifetz and Martin Meier and Schipper, {Burkhard C.}",

note = "Funding Information: ✩ Aviad acknowledges support from the Open University of Israel, Research Grant No. 46106. Martin acknowledges financial support from the Spanish Ministerio de Educaci{\'o}n y Ciencia via a Ramon y Cajal Fellowship and under grant ECO2009-12695 as well as from the Fundaci{\'o}n Ram{\'o}n Areces. Burkhard received financial support from the NSF SES-0647811, DFG SFB/TR 15, Minerva Stiftung, and IGA-UCD. We thank two anonymous referees, Leandro Chaves R{\^e}go, Eddie Dekel, Enrique Kawamura, Li Jing, Salvatore Modica, Klaus Nehring and participants in the Workshop on Unawareness at Stanford University, 2006, NASEM 2006, LOFT 2006, LAMES 2006, SAET 2007, TARK 2007, Stony Brook 2007, ESEM 2007, NBER GE conference 2007, GAMES 2008, and seminars at Bocconi, Max-Planck Institute of Mathematics in the Sciences in Leipzig, UCLA, St. Louis, Tucson, and Venice for helpful comments. Some of the material was circulated previously as a working paper titled “Unawareness, beliefs and games”. Some of the material circulated in earlier versions of the paper is now contained in Meier and Schipper (2012a) and Heifetz et al. (2011b). * Corresponding author. E-mail addresses: [email protected] (A. Heifetz), [email protected] (M. Meier), [email protected] (B.C. Schipper).",

year = "2013",

month = jan,

doi = "10.1016/j.geb.2012.09.003",

language = "אנגלית",

volume = "77",

pages = "100--121",

journal = "Games and Economic Behavior",

issn = "0899-8256",

publisher = "Academic Press Inc.",

number = "1",

}

TY - JOUR

T1 - Unawareness, beliefs, and speculative trade

AU - Heifetz, Aviad

AU - Meier, Martin

AU - Schipper, Burkhard C.

N1 - Funding Information: ✩ Aviad acknowledges support from the Open University of Israel, Research Grant No. 46106. Martin acknowledges financial support from the Spanish Ministerio de Educación y Ciencia via a Ramon y Cajal Fellowship and under grant ECO2009-12695 as well as from the Fundación Ramón Areces. Burkhard received financial support from the NSF SES-0647811, DFG SFB/TR 15, Minerva Stiftung, and IGA-UCD. We thank two anonymous referees, Leandro Chaves Rêgo, Eddie Dekel, Enrique Kawamura, Li Jing, Salvatore Modica, Klaus Nehring and participants in the Workshop on Unawareness at Stanford University, 2006, NASEM 2006, LOFT 2006, LAMES 2006, SAET 2007, TARK 2007, Stony Brook 2007, ESEM 2007, NBER GE conference 2007, GAMES 2008, and seminars at Bocconi, Max-Planck Institute of Mathematics in the Sciences in Leipzig, UCLA, St. Louis, Tucson, and Venice for helpful comments. Some of the material was circulated previously as a working paper titled “Unawareness, beliefs and games”. Some of the material circulated in earlier versions of the paper is now contained in Meier and Schipper (2012a) and Heifetz et al. (2011b). * Corresponding author. E-mail addresses: [email protected] (A. Heifetz), [email protected] (M. Meier), [email protected] (B.C. Schipper).

PY - 2013/1

Y1 - 2013/1

N2 - 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 cannot be common certainty of strict preference to trade. Moreover, we prove a generalization of the "No-agreeing-to-disagree" theorem.

AB - 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 cannot be common certainty of strict preference to trade. Moreover, we prove a generalization of the "No-agreeing-to-disagree" theorem.

KW - Agreement

KW - Awareness

KW - Common prior

KW - Inattention

KW - Interactive epistemology

KW - Speculative trade

KW - Unawareness

UR - http://www.scopus.com/inward/record.url?scp=84867671074&partnerID=8YFLogxK

U2 - 10.1016/j.geb.2012.09.003

DO - 10.1016/j.geb.2012.09.003

M3 - ???researchoutput.researchoutputtypes.contributiontojournal.article???

AN - SCOPUS:84867671074

SN - 0899-8256

VL - 77

SP - 100

EP - 121

JO - Games and Economic Behavior

JF - Games and Economic Behavior

IS - 1

ER -

Unawareness, beliefs, and speculative trade

Abstract

Bibliographical note

Keywords

Access to Document

Other files and links

Fingerprint

Cite this