Object-Based Unawareness II: Applications

Board & Chung [3] propose a class of structures (OBU structures) designed to model agents’ awareness of their own unawareness. In particular, OBU structures are capable of modeling an agent who is “not sure whether or not she is aware of everything”, without the implication that she does not know what she is aware of. In Board & Chung [3] (henceforth BC), OBU structures were used to provide semantics for a language of first-order modal logic; in this paper, we show that essentially the same structures can be interpreted without appeal to a formal language, creating a purely set-theoretic model of unawareness. We prove characterization results which provide a precise description of the features of these structures, and then present two applications. The first application examines the legal interpretive doctrine verba fortius accipiuntur contra proferentem, which instructs judges to resolve any contractual ambiguity against the party who drafted the contract. We show that this doctrine systematically out-performs other doctrines when there is persistent asymmetric awareness between the contracting parties. The second application is to revisit a central result in Heifetz, Meier, and Schipper [16] (henceforth HMS). HMS claim that “unawareness can be interpreted as a special form of delusion”. However, surprisingly, they prove that the No-Trade Theorem continues to hold despite this existence of delusion. In our framework, unawareness and delusion are distinct, and unawareness and non-delusion can co-exist in general. Interpreted in these terms, the HMS model is a special case where they do not. We show that the HMS model satisfies a property called terminal-non-delusion, and it is this property that drives their result.