Knowing What to Believe
Ken Binmore · Oxford University Press eBooks · 2012
This chapter examines situations when players conceal information from each other. The kinds of information which should be common knowledge may consist of rules of the game, the player’s payoffs, and the subjective probabilities they assign to chance moves. When the scenario is of incomplete information, the end-situation is called a Bayesian game. According to Harsanyi’s theory of incomplete information, people are often doubtful about the precise preferences of their fellow players. To go on with the game, actors therefore must be defined by their preferences and beliefs. They are cast with each role to play. Although no new principles are introduced, Harsanyi’s theory can account for the fact that there is indeed missing information, which as observed, is a practice applied in many economic assumptions and theories.