We show that for a disappointment-averse decision maker, splitting a lottery into several stages reduces its value. To do this, we extend Gul.s (1991) model of disappointment aversion into a dynamic setting while keeping its basic characteristics intact. The result depends solely on the sign of...

I study how choice behavior given unawareness of an event differs from choice behavior given subjective belief of zero probability on that event. Depending on different types of unawareness the decision-maker suffers, behavior under unawareness is either incomparable with that under zero...

We study a two-stage choice problem, where alternatives are allocations between the decision maker (DM) and a passive recipient. The recipient observes choice behavior in stage two, while stage one choice is unobserved. Choosing selfishly in stage two, in the face of a fairer available...

I develop a set-theoretic model of unawareness without making any structural assumptions on the underlying state space. Unawareness is characterized as a measurability constraint that results in players' reasoning about a “coarse" subjective algebra of events. The model is shown to be...

I construct a state space model with unawareness following Aumann (1976). Dekel, Lipman and Rustichini (1998a) show that standard state space models are incapable of representing unawareness. The model circumvents the impossibility result by endowing the agent with a subjective state space that...