Games with Unawareness

Stanford Graduate School of Busirness Paper No. 2122

52 Pages Posted: 7 Nov 2012

See all articles by Yossi Feinberg

Yossi Feinberg

Stanford Graduate School of Business

Date Written: August 2012

Abstract

We provide a tool to model and solve strategic situations where players' perceptions are limited, in the sense that they may only be aware of, or model, some of the aspects of the strategic situations at hand, as well as situations where players realize that other players' perceptions may be limited. We define normal, repeated, incomplete information and dynamic (extensive) form games with unawareness using a unified methodology. A game with unawareness is defined as a collection of standard games (of the corresponding form). The collection specifies how each player views the game, how she views the other players' perceptions of the game and so on. The modeler's description of perceptions, the players' description of other players' reasoning, etc. are shown to have consistent representations. We extend solution concepts such as rationalizability and Nash equilibrium to these games and study their properties. It is shown that while unawareness in normal form games can be mapped to incomplete information games, the extended Nash equilibrium solution is not mapped to a known solution concept in the equivalent incomplete information games, implying that games with unawareness generate novel types of behavior.

JEL Classification: C72, D81, D82

Suggested Citation

Feinberg, Yossi, Games with Unawareness (August 2012). Stanford Graduate School of Busirness Paper No. 2122, Available at SSRN: https://ssrn.com/abstract=2172515

Yossi Feinberg (Contact Author)

Stanford Graduate School of Business ( email )

655 Knight Way
Stanford, CA 94305-5015
United States

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