Games with Incomplete Information

Abstract

Classical economic models almost universally assume that the resources and preferences of individuals (or firms) are known not only to the individuals themselves but also to their competitors. In practice, this assumption is rarely correct. Once the attempt is made to include uncertainty (not just about the environment but also about other strategic actors) within economic models, it becomes necessary to broaden those models substantially, to include considerations about the beliefs of individuals concerning the status of their competitors, as well as about learning as it takes place over time. A standard approach for doing this is to model the situation under investigation as a game with incomplete information, and to study the (Bayesian) equilibrium points of that game.