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