Solution concepts of principal-agent models with unawareness of actions
Summary: In numerous economic scenarios, contracting parties may not have a clear picture of all the relevant aspects. A contracting party may be unaware of what she and/or others are entitled to determine. Therefore, she may reject a contract that is too good to be true. Further, a contracting party may actively exert cognitive effort before signing a contract, so as to avoid being trapped into the contractual agreement ex post. In this paper, we propose a general framework to investigate these strategic interactions with unawareness, reasoning and cognition and intend to unify the solution concepts in the contracting context with unawareness. We build our conceptual framework upon the classical principal-agent relationship and compare the behaviors under various degrees of the unaware agent's sophistication.
- A Cognitive Hierarchy Model of Games
- A Further Generalization of the Kakutani Fixed Point Theorem, with Application to Nash Equilibrium Points
- A Social Equilibrium Existence Theorem*
- An Analysis of the Principal-Agent Problem
- Awareness and partitional information structures
- Belief, awareness, and limited reasoning
- Costly Contract Contingencies
- Fixed-point and Minimax Theorems in Locally Convex Topological Linear Spaces
- Generalized solution concepts in games with possibly unaware players
- Incomplete contracts and complexity costs
- Incorporating unawareness into contract theory
- Information structures with unawareness
- Interactive unawareness
- Lexicographic Probabilities and Equilibrium Refinements
- On the Strategic Stability of Equilibria
- Quantal response equilibria for normal form games
- Satisficing contracts
- Shrouded attributes, consumer myopia, and information suppression in competitive markets
- Standard State-Space Models Preclude Unawareness
- Strong belief and forward induction reasoning.
- The Theory of Moral Hazard and Unobservable Behaviour: Part I
- Unawareness and bankruptcy: a general equilibrium model
- Unawareness and partitional information structures
- Unawareness of theorems
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