Center for Behavioral Decision Research

CBDR : Seminar Series : Seminar by Oliver Board

Object-Based Unwareness: Theory and Applications

	presented by Oliver Board (University of Pittsburgh)


	Thursday, February 5	link to paper
	12:00
	PH 223D	link to Speaker's Site

	Abstract:

	We present a model of unawareness based on the information partition model that avoids the impossibility result of Dekel, Lipman, and Rustichini (Econometrica 1998). Unlike most existing models in the literature on unawareness, this model allows us to capture an agent who is “not sure whether or not she is aware of everything”, without the implication that she does not know what she is aware of. We prove characterization results which provide a precise description of the features of these structures, and then present two applications. The ﬁrst application examines the legal interpretive doctrine contra proferentem (the cp doctrine), which instructs the court to resolve any contractual ambiguity against the party who drafted the contract. We compare it with the opposite doctrine that resolves ambiguity in favor of the drafter. We ﬁrst show that, absent unawareness, there is a strong symmetry between the two doctrines and, contrary to conventional wisdom, neither systematically outperforms the other. If the drafter is aware of more than the other agent, however, a case can be made for the cp doctrine against the alternative. Our second application examines speculative trade. We ﬁrst generalize the classical No Trade Theorem to situations where agents are delusional but nevertheless satisfy a weaker condition called terminal non-delusion. We then introduce the concepts of living in denial (when agents are certain, perhaps incorrectly, that they are aware of everything) and living in paranoia (where agents are certain, again perhaps incorrectly, that they are unaware of something). We show that both living in denial and living in paranoia, in the absence of other forms of delusion, imply terminal non-delusion, and hence the no-trade theorem holds.

	Host at CMU: Weber