Essays on Unawareness and Its Applications

Essays on Unawareness and Its Applications

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This dissertation extends the standard framework used in game theory and information economics to incorporate unawareness of decision makers, i.e. the situation that they don't know that they lack relevant information. We start by revisiting a classic example in the game theory literature to demonstrate different implication of unawareness and imperfect information (impreciseness). Then we show that for games with incomplete information, cursed equilibrium, an innovative equilibrium concept which fits a broad range of experimental or field datasets, can be justified in the standard theoretical framework allowing unawareness. Namely, given any finite Bayesian game with a commonly known common prior, the set of cursed equilibria coincides a set of Bayesian Nash equilibria of the game augmented with players partially aware of other players' original information structure. Finally, we analyze an important stock market regulation on information disclosure. We show that if a professional investor knows that small investors are unaware of price relevant uncertainties, the regulation aimed at protecting small investors and improving market efficiency can however increase the cost of information acquisition. This result can explain an unexpected empirical finding on the impact of the regulation across different firms.When an individual is unaware of an event, the states she considers as possible belong to a subjective space in which this ... We start by revisiting the barbecue problem, a classic example in the game theory literature, to demonstrate different anbsp;...

Title:Essays on Unawareness and Its Applications
Publisher:ProQuest - 2007


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