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Efficiency in Games with Incomplete Information

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  • Itai Arieli
  • Yakov Babichenko
  • Atulya Jain
  • Rann Smorodinsky

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, 2025. "Efficiency in Games with Incomplete Information," Papers 2510.12508, arXiv.org, revised Dec 2025.
    • Handle: RePEc:arx:papers:2510.12508
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    References listed on IDEAS

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    1. Laura Doval & Alex Smolin, 2024. "Persuasion and Welfare," Journal of Political Economy, University of Chicago Press, vol. 132(7), pages 2451-2487.
    2. Dirk Bergemann & Stephen Morris, 2019. "Information Design: A Unified Perspective," Journal of Economic Literature, American Economic Association, vol. 57(1), pages 44-95, March.
    3. Robert J. Aumann, 1995. "Repeated Games with Incomplete Information," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262011476, December.
    4. Ichihashi, Shota, 2019. "Limiting Sender's information in Bayesian persuasion," Games and Economic Behavior, Elsevier, vol. 117(C), pages 276-288.
    5. Luis Rayo & Ilya Segal, 2010. "Optimal Information Disclosure," Journal of Political Economy, University of Chicago Press, vol. 118(5), pages 949-987.
    6. Elliot Lipnowski & Doron Ravid, 2020. "Cheap Talk With Transparent Motives," Econometrica, Econometric Society, vol. 88(4), pages 1631-1660, July.
    7. Crawford, Vincent P & Sobel, Joel, 1982. "Strategic Information Transmission," Econometrica, Econometric Society, vol. 50(6), pages 1431-1451, November.
    8. Arieli, Itai & Babichenko, Yakov & Tennenholtz, Moshe, 2017. "Sequential commitment games," Games and Economic Behavior, Elsevier, vol. 105(C), pages 297-315.
    9. 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.
    Full references (including those not matched with items on IDEAS)

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