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We develop a model of games with awareness that allows for differential levels of awareness. We show that, for the standard modal logical interpretations of belief and awareness, a player cannot believe there exist propositions of which he is unaware. Nevertheless, we argue that a boundedly rational individual may regard the possibility that there exist propositions of which she is unaware as being supported by inductive reasoning, based on past experience and consideration of the limited awareness of others. In this paper, we provide a formal representation of inductive reasoning in the context of a dynamic game with awareness. We show that, given differential awareness over time and between players, individuals can derive inductive support for propositions expressing their own unawareness.

Keywords: Unawareness ; bounded rationality ; induction

Subject(s): Risk and Uncertainty

Issue Date: Jun 16 2009

Publication Type: Working or Discussion Paper

PURL Identifier: http://purl.umn.edu/151188

Total Pages: 32

JEL Codes: D80; D82

Series Statement: Risk and Uncertainty Program

R09/1

Record appears in: University of Queensland > School of Economics > Risk and Sustainable Management Group Working Papers





Author: Grant, Simon ; Quiggin, John

Source: http://ageconsearch.umn.edu/record/151188?ln=en



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