Spyros Galanis

Department of Economics · City, University of London · UK · spyros.galanis'at'city.ac.uk

I am a Senior Lecturer (Associate Professor) at the Department of Economics of City, University of London, since 2019. Before, I was an Associate Professor at the Department of Economics of the University of Southampton. My research interests include decision theory, finance, game theory and experiments.

My main research focuses on the role that uncertainty, information and bounded perception have on single- and multi-agent decision making. I examine under which conditions speculative trade occurs, in three different settings: when traders have a bounded perception of their uncertainty due to their unawareness, when they are dynamically and time inconsistent, and when they are not financially sophisticated enough to formulate complex trading strategies. I also study when information is valuable and whether markets (including the newly formulated "prediction" markets) aggregate and reveal information through their price mechanism . Finally, a new research interest of mine involves public finance, and in particular an empirical estimation of the Laffer curve using a theoretical model of tax evasion with strategic complementarities.

After teaching International Trade Theory for more than 10 years, I wrote a book, "Six Easy Models of International Trade Theory". It provides a short and concise introduction to the main theories of international trade, addressing the following questions. Are there gains for a country that engages in free trade? Which goods does it export and import? What happens to its income distribution? What are the implications for consumers and producers when it restricts trade, for example by imposing import tariffs?

I also co-organize the annual Workshop in Economic Theory, which begun as the Southampton Winter Workshop in Economic Theory and is now co-organized by the Universities of Bristol, Kent and Southampton.


Financial Complexity and Trade

Games and Economic Behavior, November 2018, 112, pp. 219-230

What are the implications on trading activity if investors are not sophisticated enough to understand and evaluate trades that have a complex payoff structure? Can frictions generated by this type of financial complexity be so severe that they lead to a complete market freeze, like that of the recent financial crisis? Starting from an allocation that is not Pareto optimal, we find that whether complexity impedes trade depends on how investors perceive risk and uncertainty. For smooth convex preferences, such as subjective expected utility, complexity cannot halt trade, even in the extreme case where each investor is so unsophisticated that he can only trade up to one Arrow-Debreu security, without being able to combine two or more in order to construct a complex trade. However, for non-smooth preferences, which allow for kinked indifference curves, such as maxmin expected utility, complexity can completely shut down trade.

Show Abstract

Speculation Under Unawareness

Games and Economic Behavior, May 2018, 109, pp. 598-615

“No trade” theorems establish that, in various trading environments, investors who share a common prior will not engage in speculation, as long as expected utility, Bayesian updating and full awareness are imposed. We relax the last assumption by allowing for asymmetric unawareness and examine under which conditions speculative behavior emerges. We find that if common knowledge is assumed (as in the settings of Aumann [1976] and Milgrom and Stokey [1982]), unawareness cannot generate speculation. This is not true, however, in settings where no common knowledge is assumed, such as speculation in equilibrium (Geanakoplos [1989]) and betting that is always beneficial (Morris [1994]), unless stronger conditions on awareness are imposed.

Show Abstract

The Value of Information in Risk-Sharing Environments with Unawareness

Games and Economic Behavior, May 2016, 97, pp. 1-18

The value of information is examined in a risk-sharing environment with unawareness and complete markets. Information and awareness are symmetric among agents, who have a clear understanding of their actions and deterministic payoffs. We show with examples that public information can make some agents strictly better off at the expense of others, contrasting the standard results of Hirshleifer [1971] and Schlee [2001] that the value of public information is negative for all when risk averse agents are fully insured. We identify the source of this problem to be that, as awareness varies across states, it creates an awareness signal that the agents misunderstand and treat asymmetrically. As a result, risk-sharing opportunities that are available when this signal is not used, vanish when it is used. We identify a property, Conditional Independence, which we show is sufficient for the value of public information to be negative for all.

Show Abstract

The Value of Information Under Unawareness

Journal of Economic Theory, May 2015, 157, pp. 384-396

The value of information is examined in a single-agent environment with unawareness. Although the agent has a correct prior about events he is aware of and has a clear understanding of his available actions and payoffs, his unawareness may lead him to commit information processing errors and to behave suboptimally. As a result, the value of information can be negative, contrasting what is true in the standard model with partitional information and no unawareness. We show that the source of the agent’s suboptimal behavior is that he misunderstands the information revealed by his varying awareness, treating it asymmetrically.

Show Abstract

Admissibility and Event-Rationality

Games and Economic Behavior, January 2013, 77, pp. 21-40

We develop an approach to providing epistemic conditions for admissible behavior in games. Instead of using lexicographic beliefs to capture infinitely less likely conjectures, we postulate that players use tie-breaking sets to help decide among strategies that are outcome-equivalent given their conjectures. A player is event-rational if she best responds to a conjecture and uses a list of subsets of the other players’ strategies to break ties among outcome-equivalent strategies. Using type spaces to capture interactive beliefs, we show that event-rationality and common belief of event-rationality (RCBER) imply S∞W, the set of admissible strategies that survive iterated elimination of dominated strategies. By strengthening standard belief to validated belief, we show that event-rationality and common validated belief of event-rationality (RCvBER) imply IA, the iterated admissible strategies. We show that in complete, continuous and compact type structures, RCBER and RCvBER are nonempty, hence providing epistemic criteria for S∞W and IA.

Show Abstract

Unawareness of Theorems

Economic Theory, January 2013, Volume 52, Issue 1, pp. 41-73

This paper provides a set-theoretic model of knowledge and unawareness. A new property called Awareness Leads to Knowledge shows that unawareness of theorems not only constrains an agent’s knowledge, but also can impair his reasoning about what other agents know. For example, in contrast to Li (J Econ Theory 144:977– 993, 2009), Heifetz et al. (J Econ Theory 130:78–94, 2006) and the standard model of knowledge, it is possible that two agents disagree on whether another agent knows a particular event. The model follows Aumann (Ann Stat 4:1236–1239, 1976) in defining common knowledge and characterizing it in terms of a self-evident event, but departs in showing that no-trade theorems do not hold.

Show Abstract

Syntactic Foundations for Unawareness of Theorems

Theory and Decision, October 2011, 71(4), pp. 593-614

We provide a syntactic model of unawareness. By introducing multiple knowledge modalities, one for each sub-language, we specifically model agents whose only mistake in reasoning (other than their unawareness) is to underestimate the knowledge of more aware agents. We show that the model is a complete and sound axiomatization of the set-theoretic model of Galanis (University of Southampton Discussion paper 709, 2007) and compare it with other unawareness models in the literature.

Show Abstract

Working Papers

Information Aggregation Under Ambiguity: Theory and Experimental Evidence

June 2019

We study information aggregation in a dynamic trading model with partially informed and ambiguity averse traders. We show theoretically that separable securities, introduced by Ostrovsky (2012) in the context of Subjective Expected Utility, no longer aggregate information if some traders have imprecise beliefs and are ambiguity averse. Moreover, these securities are prone to manipulation, as the degree of information aggregation can be influenced by the initial price, set by the uninformed market maker. These observations are also confirmed in our experiment, using prediction markets. We define a new class of strongly separable securities which are robust to the above considerations, and show that they characterize information aggregation in both strategic and non-strategic environments. We derive several theoretical predictions, which we are able to confirm in the lab.

Show Abstract

Updating Awareness and Information Aggregation

December 2018

The ability of markets to aggregate information through prices is examined in a dynamic environment with unawareness. We find that if all traders are able to minimally update their awareness when they observe a price that is counterfactual to their private information, they will eventually reach an agreement, thus generalising the result of Geanakoplos and Polemarchakis [1982]. Moreover, if the traded security is separable, then agreement is on the correct price and there is information aggregation, thus generalizing the result of Ostrovsky [2012] for non-strategic traders. We find that a trader increases her awareness if and only if she is able to become aware of something that other traders are already aware of and, under a mild condition, never becomes aware of anything more. In other words, agreement is more the result of understanding each other, rather than being unboundedly sophisticated.

Show Abstract

Dynamic Consistency, Valuable Information and Subjective Beliefs

November 2018

Ambiguity sensitive preferences must fail either Consequentialism or Dynamic Consistency (DC), two properties that are compatible with subjective expected utility and Bayesian updating, while forming the basis of backward induction and dynamic programming. We examine the connection between these properties in a general en- vironment of convex preferences over monetary acts and find that, far from being incompatible, they are connected in an economically meaningful way. In single-agent decision problems, positive value of information characterises one direction of DC. We propose a weakening of DC and show that one direction is equivalent to weakly valuable information, whereas the other characterises the Bayesian updating of the subjective beliefs which are revealed by trading behavior. In financial markets, we characterize no speculative trade, without requiring any form of Consequentialism, and show that there is weakly negative value of public information in risk-sharing environments with no aggregate uncertainty.

Show Abstract

Tax Evasion and Laffer Curves

March 2018

We provide a theory of the Laffer curve (LC) using a simple model of tax evasion with strategic complementarities, which arise from the assumption that the cost of being caught while evading is decreasing as more people evade their taxes. We find that with either sufficiently low or sufficiently high tax rates, there is a unique equilibrium, therefore a unique level of tax evasion and tax revenues. If taxes are in between, there can be multiple equilibria which imply two LCs, one with high and one with low tax evasion. The policy implication of this result is that if taxes are sufficiently high, it is possible to increase tax revenues by reducing taxes, even though locally the LC was upward sloping. Using data on VAT evasion, we find empirical evidence that supports our assumption of strategic complementarities and the presence of multiple LCs. Finally, we provide a numerical example by calibrating the LCs for Greece and show that an increase in the VAT rate would reduce tax revenues.

Show Abstract

Positive Common Priors and Speculative Trade

March 2016

The speculative trade theorem specifies that a positive common prior, which assigns positive probability to all elements of the join of the agents’ partitions, implies that there can be no mutually beneficial trade that is common knowledge at some state. We show that the reverse is also true for full support type structures, where at each state a type assigns positive probability to the element of the join that contains this state. By providing this behavioral characterization of positive common priors, we complement the existing result of the literature, that for arbitrary type structures there is a (not necessarily positive) common prior if and only if there is no mutually beneficial trade that is common knowledge at all states.

Show Abstract

Concern for Relative Standing and Deception

IZA Discussion Paper No.8442, August 2014

We report results from a sender-receiver deception game, which tests whether an individual’s decision to deceive is influenced by a concern for relative standing in a reference group. The sender ranks six possible outcomes, each specifying a payoff for him and the receiver. A message is then transmitted to the receiver, announcing that the sender has ranked the outcomes according to the receiver’s payoff, from highest to lowest. The receiver, without knowing that there is conflict of interest, chooses an action that determines the payoff of both players. The sender has an incentive to deceive the receiver, in order to obtain a higher payoff. A sender is positively biased if he thinks that he is higher in the deception distribution than in reality. We show theoretically that a positively biased sender will increase cheating when presented with information about the deception of his peers. The experimental data confirm this. We conclude that concern for relative standing does play a role in the decision to deceive.

Show Abstract

Trade and the Value of Information Under Unawareness

June 2011

Newer versions of the results of this paper are contained in the papers "The Value of Information Under Unawareness", "The Value of Information in Risk-Sharing Environments with Unawareness" and "Speculation Under Unawareness".

Show Abstract


Download PDF

Research Interests

Decision Theory, Finance, Game Theory and Experiments

  • 2019 - present Senior Lecturer (Associate Professor), Department of Economics, City, University of London, UK
  • 2014 - 2018 Associate Professor, Department of Economics, University of Southampton, UK
  • 2013 - 2014 Senior Lecturer, Department of Economics, University of Southampton, UK
  • 2007 - 2013 Lecturer (=Assistant Professor), Economics Division, University of Southampton, UK
  • 2005 - 2006 Instructor, Department of Economics, University of Rochester, Rochester, NY
  • 2004 - 2006 Teaching Assistant, Department of Economics, University of Rochester, Rochester, NY
Working Papers
  • Information Aggregation Under Ambiguity: Theory and Experimental Evidence, with Christos A. Ioannou and Stelios Kotronis, June 2019
  • Updating Awareness and Information Aggregation, with Stelios Kotronis, December 2018
  • Dynamic Consistency, Valuable Information and Subjective Beliefs, November 2018
  • Tax Evasion and Laffer Curves, with Alessandro Mennuni, March 2018
  • Positive Common Priors and Speculative Trade, March 2016
  • Concern for Relative Standing and Deception, with Michael Vlassopoulos, August 2014, IZA Discussion Paper No.8442
  • Trade and the Value of Information Under Unawareness, June 2011
Work in progress
  • Limited attention and the value of information
  • No-Arbitrage Pareto
  • Experiments on Information Aggregation in Dynamic Markets
  • Placing Trust on Experts

NBER/NSF/CEME Conference on General Equilibrium Theory, October 2006, Midwest Economic Theory, Purdue University, October 2006, Canadian Economic Theory Conference, Montreal, May 2007, XVI European Workshop on General Equilibrium, Warwick, June 2007, TARK XI, Brussels, June 2007, 8th SAET Conference on Current Trends in Economics, Kos, June 2007, EEA-ESEM, Budapest, August 2007, Summer in Birmingham, June 2008, FUR XIII, Barcelona, July 2008, CRETE 2008, Naxos, Greece, July 2008, TARK XII, Stanford, July 2009, RES, Surrey, March 2010, CRETE 2010, Tinos, July 2010, Workshop on Epistemic Game Theory, Stony Brook, July 2010, Second Brazilian Workshop of the Game Theory Society, Sao Paolo, July 2010, 10th Conference on Logic and the Foundations of Game and Decision Theory, Seville, June 2012, Florence Workshop on Behavioral and Experimental Economics, May 2013, International Workshop on Unawareness, University of Queensland, Brisbane, Australia, January 2014, CRETE 2014, Milos, Greece, July 2014, Royal Economic Society Conference, Manchester, March 2015, RUD Conference, Milan June 2015, Workshop on Ambiguity and its Implications in Finance and Macroeconomics, Essex, December 2015, Warwick, June 2016, Manchester, June 2016, EWGET 2016, Glasgow, June 2016, RUD 2016, Paris, June 2016, CRETE 2016, Tinos, July 2016, Warwick, March 2017, Bristol, June 2017, FUR, York, June 2018, Workshop on Economic Science with Heterogeneous Interacting Agents, London, June 2019, SAET Conference, Ischia, July 2019, CRETE 2019, Tinos, July 2019.


University of British Columbia, University of Colorado at Boulder, University of Maastricht, Université Paris 1 Panthéon Sorbonne, Queen Mary, University of London, University of Rochester, University of Southampton, University of Western Ontario, University of Exeter, University of Piraeus, Collegio Carlo Alberto, University of Cyprus, European University Institute, University of Bath, University of Manchester, Kyoto Institute of Economic Research, Kyoto University, City University London, Queen Mary, University of London, Royal Holloway, University of London, University of California, Davis, City, University of London, University of St. Andrews, University of Kent.

Fellowships, Scholarships and Awards
  • Pump priming fund, City, University of London, 2019
  • Staff Research Development Fund Grant, University of Southampton, 2017
  • The Jaffray lecture (for an outstanding paper by young researchers), to the paper "Dynamic Consistency and Subjective Beliefs'', RUD conference, Milan 2015.
  • Special Project Grant Scheme, Royal Economic Society, with M.Makris and M.Kwiek, 2014 - 2015
  • Special Project Grant Scheme, Royal Economic Society, with M.Makris and M.Kwiek, 2013 - 2014
  • Small Research Grant, British Academy, with M.Vlassopoulos, 2012
  • Staff Research Development Fund Grant, University of Southampton, with M.Vlassopoulos, 2012
  • Royal Economics Society Conference Grant, 2009
  • University of Rochester Tuition Scholarship and Fellowship, 2003 - 2007
  • W.Allen Wallis Institute of Political Economy Fellowship, 2004 - 2005
  • University of Rochester Tuition Scholarship, 2002 - 2003
  • M.Sc. in Economics, May 2002, Examiners' Prize for Best Overall Performance
Other Activities
  • Advisor, Aaro Capital Ltd, London, 2019 - present
  • Visitor, Kyoto Institute of Economic Research, Kyoto University, January 2017
  • Visitor, University College London, October 2015 - January 2016
  • Co-organizer, Bristol Kent Southampton Workshop in Economic Theory, June 2019
  • Co-organizer, Bristol Southampton Workshop in Economic Theory, February 2018
  • Co-organizer (with Max Kwiek and Miltos Makris), Southampton Winter Workshop in Economic Theory, (February 2013, January 2014, February 2015, March 2016, February 2017)
  • Programme committee member for the 10th LOFT (Conference on Logic and the Foundations of Game and Decision Theory) in Seville, Spain (June 2012), the 11th LOFT in Bergen, Norway (June 2014), the 12th LOFT in Maastricht, The Netherlands (July 2016) and the 13th LOFT in Milan, Italy (July 2018)


  • International Trade Theory and Policy, Spring 2008-2018
  • Topics in Economic Theory, Spring 2009-2018
  • PhD Micro, Spring 2012-2015
  • Microeconomic Theory II, Fall 2007, Fall 2011
  • Intermediate Microeconomics, Summer 2006
  • International Trade, Summer 2005