Experimental & Behavioural Economics Seminar - Evan Piermont (Royal Holloway - London)

Title: Dynamic Partial Awareness: Theory and Experiment, with Felipe Augusto de Araujo (Experimental Material) and Joseph Y. Halpern (Theory Material)

Abstract: We use a pattern matching task to induce unawareness in an experimental setting and in a natural and endogenous way. While the task is easy to understand, the solution space is complex and difficult to visualize. We show that exposure to unawareness is related to more cautious (risk-averse) behavior in subsequent tasks, but only when the subsequent tasks are conceptually related to unawareness (i.e., to the pattern matching task).

We then develop a modal logic to capture partial awareness and consider what happens when a partially aware decision maker discovers novel statements. We argue that such discoveries will in general affect the decision maker's beliefs about statements she was previously aware of. This stands in contrast to existing model of growing awareness where ex-post beliefs marginalize to ex-ante beliefs and can explain our experimental results.