Abstract
In a game of incomplete information some of the players possess private information which may be relevant to the strategic interaction. Private information is modelled by a type space, in which every type of each player is associated with a belief about the basic issues of uncertainty (like payoffs) and about the other players’ types. At a Bayesian equilibrium each type chooses a strategy which maximizes its expected payoff given the choice of strategies by the other players’ types. Bayesian equilibrium payoffs are often inefficient relative to the equilibrium payoffs that would result had the players been fully informed.
This chapter was originally published in The New Palgrave Dictionary of Economics, 2nd edition, 2008. Edited by Steven N. Durlauf and Lawrence E. Blume
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Heifetz, A. (2008). Epistemic Game Theory: Incomplete Information. In: The New Palgrave Dictionary of Economics. Palgrave Macmillan, London. https://doi.org/10.1057/978-1-349-95121-5_2663-1
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DOI: https://doi.org/10.1057/978-1-349-95121-5_2663-1
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Publisher Name: Palgrave Macmillan, London
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