Decision-theoretic approaches to non-knowledge in economics

Abstract

We review two strands of conceptual approaches to the formal representation of a decision maker's non-knowledge at the initial stage of a static one-person, one-shot decision problem in economic theory. One focuses on representations of non-knowledge in terms of probability measures over sets of mutually exclusive and exhaustive consequence-relevant states of Nature, the other deals with unawareness of potentially important events by means of sets of states that are less complete than the full set of consequence-relevant states of Nature. We supplement our review with a brief discussion of unresolved matters in both approaches.