The paper introduces the problem of unawareness into principal--agent theory and discusses optimal incentive contracts when the agent may be unaware of her action space. Depending on the agent's default behaviour, it can be optimal for the principal to propose an incomplete contract (that keeps...

The paper introduces the problem of unawareness into principal--agent theory and discusses optimal incentive contracts when the agent may be unaware of her action space. Depending on the agent's default behaviour, it can be optimal for the principal to propose an incomplete contract (that keeps...

This paper develops a contracting model in which the principal frames the contract when the agent is unaware of some contingencies, yet is aware that she may be unaware. We call the contract vague if the agent is still unaware of some contingencies after understanding the contract. We show that...

Whether consumers are aware of potentially adverse product effects, is key for private and social incentives to disclose information. To obtain a better understanding of this issue we propose a simple monopoly model that highlights the conceptual difference between consumer unawareness and...

The available evidence from numerous studies in psychology suggests that overconfidence is a much more important phenomenon in North America than in Japan. Relatedly, North Americans appear to view high self-esteem much more positively than Japanese. The pattern is reversed when it comes to...

The available evidence from numerous studies in psychology suggests that overconfidence is a more important phenomenon in North America than in Japan. Relatedly, North Americans appear to view high self-esteem more positively than Japanese. The pattern is reversed when it comes to shame, a...

In numerous economic scenarios, contracting parties may not have a clear picture of all the relevant aspects. A contracting party may be unaware of what she and/or others are entitled to determine. Therefore, she may reject a contract that is too good to be true. Further, a contracting party may...

The paper introduces the problem of unawareness into multi-dimensional Principal–Agent theory. We introduce two key parameters to describe the problem, the extent and the effect of unawareness, show under what conditions it is optimal for the Principal to propose an incomplete or a complete...

Whether consumers are aware of potentially adverse product effects is key to private and social incentives to disclose information about undesirable product characteristics. In a monopoly model with a mix of aware and unaware consumers, a larger share of unaware consumers makes information...

The available evidence from numerous studies suggests that overconfidence is a more important phenomenon in North America than in Japan. The pattern is reversed for shame, which appears to play a more important role among Japanese than North Americans. We develop a model that endogenizes these...