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Efficiency in Games with Incomplete Information

Author

Listed:
  • Itai Arieli

    (Technion: Israel Institute of Technology, University of Toronto)

  • Yakov Babichenko

    (Technion: Israel Institute of Technology)

  • Atulya Jain

    (ajain@uni-bonn.de)

  • Rann Smorodinsky

    (Technion: Israel Institute of Technology)

Abstract

We study games with incomplete information and characterize when a feasible outcome is Pareto efficient. Outcomes with excessive randomization are inefficient: generically, the total number of action profiles across states must be strictly less than the sum of the number of players and the number of states. We consider three applications. A cheap talk outcome is efficient only if pure; with state-independent sender payoffs, it is efficient if and only if the sender’s most preferred action is induced with certainty. In natural settings, Bayesian persuasion outcomes are inefficient across many priors. Finally, ranking-based allocation mechanisms are inefficient under mild conditions.

Suggested Citation

  • Itai Arieli & Yakov Babichenko & Atulya Jain & Rann Smorodinsky, 2026. "Efficiency in Games with Incomplete Information," ECONtribute Discussion Papers Series 390, University of Bonn and University of Cologne, Germany.
    • Handle: RePEc:ajk:ajkdps:390
    as

    Download full text from publisher

    File URL: https://www.econtribute.de/RePEc/ajk/ajkdps/ECONtribute_390_2026.pdf
    File Function: First version, 2026
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    References listed on IDEAS

    as
    1. Ichihashi, Shota, 2019. "Limiting Sender's information in Bayesian persuasion," Games and Economic Behavior, Elsevier, vol. 117(C), pages 276-288.
    2. Laura Doval & Alex Smolin, 2024. "Persuasion and Welfare," Journal of Political Economy, University of Chicago Press, vol. 132(7), pages 2451-2487.
    3. Emir Kamenica & Xiao Lin, 2024. "Commitment and Randomization in Communication," Papers 2410.17503, arXiv.org, revised Nov 2025.
    4. Yunus C. Aybas & Eray Turkel, 2019. "Persuasion with Coarse Communication," Papers 1910.13547, arXiv.org, revised May 2024.
    5. Elliot Lipnowski & Doron Ravid, 2020. "Cheap Talk With Transparent Motives," Econometrica, Econometric Society, vol. 88(4), pages 1631-1660, July.
    6. Robert J. Aumann, 1995. "Repeated Games with Incomplete Information," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262011476, December.
    7. Arieli, Itai & Babichenko, Yakov & Tennenholtz, Moshe, 2017. "Sequential commitment games," Games and Economic Behavior, Elsevier, vol. 105(C), pages 297-315.
    8. Antić, Nemanja & Persico, Nicola, 2023. "Equilibrium selection through forward induction in cheap talk games," Games and Economic Behavior, Elsevier, vol. 138(C), pages 299-310.
    9. Yeon‐Koo Che & Jinwoo Kim & Fuhito Kojima & Christopher Thomas Ryan, 2024. "“Near” Weighted Utilitarian Characterizations of Pareto Optima," Econometrica, Econometric Society, vol. 92(1), pages 141-165, January.
    10. Dirk Bergemann & Stephen Morris, 2019. "Information Design: A Unified Perspective," Journal of Economic Literature, American Economic Association, vol. 57(1), pages 44-95, March.
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    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

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    JEL classification:

    • C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games
    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
    • D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search; Learning; Information and Knowledge; Communication; Belief; Unawareness

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