12. Incomplete and Imperfect Information Flashcards
What are games of incomplete information?
Some players don’t know the structure of the game and may be uncertain about strategies or payoffs of other players
What are games of imperfect information?
Players are unsure about the history of the game
What is asymmetric information?
One player knows something the others don’t
What can be done with games of symmetric information?
They’re usually solvable using expected value
What is a Harsanyi transformation?
Transforms a game of incomplete information to a game of asymmetric information.
How is a Harsanyi transformation implemented?
A spectrum of “types” of players is created and each is assigned a probability.
What strategy is optimal in a Harsanyi transformation?
One that is effective against a range of opponents
What is the market for lemons?
Asymmetric information results in a market imbalance
What is a moral hazard?
One party doesn’t bear the full consequences of their actions
What is the principle of game transformation?
Every sequential game can be expressed as a simultaneous game
