week10-class(1) - Games of Incomplete Information ECOS3012...

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Games of Incomplete Information ECOS3012 - Strategic Behavior School of Economics, FASS University of Sydney Lecture 10, May 18, 2011 ECOS3012 - Strategic Behavior (USYD) Games of Incomplete Information Lecture 10, May 18, 2011 1 / 7
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Games of Incomplete Information I I A game of incomplete information models strategic situations when some of the relevant characteristics that determine payoffs are not common-knowledge among the players. These situations are typical. I a firm might know its own marginal costs but it does not know the costs of its competitors. I A seller may know the precise quality of the object he is selling but the buyer may not know. I A buyer in an auction would know her own estimate of the object on sale but is unaware of the estimates of the other buyers. (Contrast this with a game of imperfect information). I Consider the following simple game: L R T 3,1 0,1+a B 0,1 1,1+a Figure: a is some parameter. ECOS3012 - Strategic Behavior (USYD) Games of Incomplete Information Lecture 10, May 18, 2011 2 / 7
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Games of Incomplete Information II I If the value of a is common-knowledge, this is a game with imperfect information – because player
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week10-class(1) - Games of Incomplete Information ECOS3012...

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