One of the most difficult things facing any decision maker is the problem of unknown unknowns – that is, the things we do not know we do not know.
Generally, in a standard decision-theoretic framework, the set of possibilities is known at the beginning of the problem. However, in reality decision makers are often presented with “surprises” – events and outcomes that had not previously considered.
So, shouldn’t a realistic model of choice under uncertainty incorporate the possibility that individuals are unaware of some relevant possibilities? In strategic interactions, some individuals may be unaware of possible moves of which others are aware, while others may appreciate that there may be possibilities of which they are unaware, even though they cannot express this understanding in the standard decision-theoretic framework.
To expand on this, Professor Simon Grant and Professor John Quiggin (University of Queensland) have developed a formal model of inductive reasoning among individuals with differential awareness engaged in a dynamic strategic interaction.
In this lecture, Professor Simon Grant will discuss applications of this model to decisions regarding research and discovery, and to the precautionary principle, often advocated as a basis for regulatory decisions regarding environmental risks.
About Simon Grant
Simon Grant is the John C. Harsanyi Professor of Economics in the ANU College of Business and Economics. He received his BEc(Honours)/BSc from the ANU and his PhD in Economics from Harvard University.
He is an elected fellow of the Econometric Society, the Australian Academy of Social Sciences, and The Society for the Advancement of Economic Theory. He has served as co-editor of Mathematical Social Sciences and is currently co-editor of the Journal of Mathematical Economics and associate editor of Management Science.
He currently teaches two undergraduate courses, ECON2013 Behavioral Economics and ECON2141 Strategic Thinking: An introduction to game theory.