Unawareness in Dynamic Psychological Games

Building on Battigalli and Dufwenberg (2009)'s framework of dynamic psychological games and the recent progress in the modeling of dynamic unawareness, we provide a general framework that allows for `unawareness' in the strategic interaction of players motivated by belief-dependent psychological preferences like reciprocity and guilt. We show that unawareness has a pervasive impact on the strategic interaction of psychologically motivated players. Intuitively, unawareness influences players' beliefs concerning, for example, the intentions and expectations of others which in turn impacts their behavior. Moreover, we highlight the strategic role of communication concerning feasible paths of play in these environments.