Simple Unawareness in Dynamic Psychological Games

Nielsen Carsten S. () and Alexander Sebald ()
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Nielsen Carsten S.: Department of Economics, University of Copenhagen, Ø ster Farimagsgade 5, Building 26, DK-1353, Copenhagen K, Denmark

The B.E. Journal of Theoretical Economics, 2017, vol. 17, issue 1, 29

Abstract: Building on Battigalli and Dufwenberg (2009)’s framework of dynamic psychological games and the progress in the modeling of dynamic unawareness by Heifetz, Meier, and Schipper (2013a) we model and analyze the impact of asymmetric awareness in the strategic interaction of players motivated by reciprocity and guilt. Specifically we characterize extensive-form games with psychological payoffs and simple unawareness, define extensive-form rationalizability and, using this, show that unawareness has a pervasive impact on the strategic interaction of psychologically motivated players. Intuitively, unawareness influences players’ beliefs concerning, for example, the intentions and expectations of others which in turn impacts their behavior.

Keywords: unawareness; psychological payoffs; extensive-form rationalizability (search for similar items in EconPapers)
JEL-codes: C72 C73 D80 (search for similar items in EconPapers)
Date: 2017
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Citations: View citations in EconPapers (1)

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DOI: 10.1515/bejte-2015-0011

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