Trade and the value of information under unawareness
Trade and the value of information under unawareness
The value of information and the possibility of speculation are examined in an environment with unawareness. Although agents have “correct” prior beliefs about events they are aware of and have a clear understanding of their available actions and payoffs, their unawareness may lead them to commit information processing errors and to behave suboptimally. As a result, more information is not always valuable and agents can speculate with each other. We identify two specific information processing errors that are responsible for both problems. Moreover, we construct a dynamic model where agents announce their posteriors and update their awareness as soon as they hear a counterfactual announcement. We study how awareness is updated and whether agreement about posteriors is reached.
University of Southampton
Galanis, Spyros
66c2b7af-6f28-4319-be60-787796b4054c
20 June 2013
Galanis, Spyros
66c2b7af-6f28-4319-be60-787796b4054c
Galanis, Spyros
(2013)
Trade and the value of information under unawareness
(Discussion Papers in Economics and Econometrics, 1313)
Southampton, GB.
University of Southampton
31pp.
Record type:
Monograph
(Discussion Paper)
Abstract
The value of information and the possibility of speculation are examined in an environment with unawareness. Although agents have “correct” prior beliefs about events they are aware of and have a clear understanding of their available actions and payoffs, their unawareness may lead them to commit information processing errors and to behave suboptimally. As a result, more information is not always valuable and agents can speculate with each other. We identify two specific information processing errors that are responsible for both problems. Moreover, we construct a dynamic model where agents announce their posteriors and update their awareness as soon as they hear a counterfactual announcement. We study how awareness is updated and whether agreement about posteriors is reached.
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Published date: 20 June 2013
Organisations:
Economics
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Local EPrints ID: 155621
URI: http://eprints.soton.ac.uk/id/eprint/155621
PURE UUID: 51102f3a-99b6-493f-b3a6-900a21ef031f
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Date deposited: 01 Jun 2010 13:06
Last modified: 14 Mar 2024 01:40
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Author:
Spyros Galanis
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