Working Papers

• "Information Structures with Unawareness" January, 2006

  I construct a multi-agent state space model with unawareness following Aumann (1976). Dekel, Lipman and Rustichini (1998) show that standard state space models are incapable of representing unawareness. The model circumvents the impossibility result by endowing the agent a subjective state space that differs from the full state space when he has the unawareness problem. Information is modeled as a pair, consisting of both factual information and awareness information. The model exhibits nice properties parallel to those in the standard information partition model.

• "Modeling Unawareness without Impossible States" 

  Recent development in modeling unawareness exploits special structures of the state space(s) and events, which imposes impossible states in the model. This is inconvenient in applications involving partial unawareness, notably games. In this paper I construct a model of unawareness based on an arbitrary state space. It is shown that this model is equivalent to the product model studied in Li (2006).

• "Dynamic Games of Complete Information with Unawareness" 

  I study "games" without nature's move, in which players may be unaware of some aspects of the game itself, including actions, payoffs, or some opponents, and such unawareness may be lifted by the opponents' actions during the play. Based on Li (2006a, 2006b), I propose a framework to deal with such games using standard tools of game theory.

Publications

• "The Power of Convention: A Theory of Social Preferences," November, 2005.

  Journal of Economic Behavior and Organization, forthcoming.

  Real life evidence suggests people act as if they care about others' welfare as well as their own, i.e. have "social preferences." I propose a model for such phenomena by incorporating players' preferences for social implications of their actions, determined by exogenous "conventions," in addition to the material consequences of the actions. A convention induces rankings over one's feasible actions, conditional on one's belief about the opponent's action. I construct games with conventions using the psychological games framework developed in Geanakoplos, Pearce and Stacchetti (1989). With a notion of distributional convention that incorporates the efficiency and fairness considerations, I show that equilibrium behavior in games with such conventions reflects social preferences. The model yields tight and testable predictions consistent with a large body of experimental results, is parsimonious and is suggestive of further studies, both experimentally and theoretically.