A Note on Unawareness and Zero Probability

Jing Li ()
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Jing Li: Department of Economics, University of Pennsylvania

PIER Working Paper Archive from Penn Institute for Economic Research, Department of Economics, University of Pennsylvania

Abstract: I study how choice behavior given unawareness of an event differs from choice behavior given subjective belief of zero probability on that event. Depending on different types of unawareness the decision-maker suffers, behavior under unawareness is either incomparable with that under zero probability (in the case of pure unawareness), or drastically different (in the case of partial unawareness). The key differences are (1) partial unawareness permits dynamically inconsistent choice, while zero probability beliefs do not; and (2) there are unforeseen options in an unawareness environment that are necessarily modeled as dominated options in zero probability models.

Keywords: unawareness; zero probability; dynamic consistency; unforeseen contingency; unforeseen options (search for similar items in EconPapers)
JEL-codes: C70 C72 D80 D82 D83 (search for similar items in EconPapers)
Pages: 18 pages
Date: 2008-01-02
New Economics Papers: this item is included in nep-gth and nep-upt
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Citations: View citations in EconPapers (23)

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