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Bayesian Equilibrium and Incentive-Compatibility: An Introduction

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  • Roger B. Myerson

Abstract

This paper is an introduction to the analysis of games with incomplete information, using a Bayesian model. the logical foundations of the Bayesian model are discussed. To describe rational behavior of players in a Bayesian game, two basic solution concerts are present: Bayesian equilibrium, for games in which the players cannot communicate; and Bayesian incentive-compatibility, for games in which the players can communicate. The concept of virtual utility is developed as a tool for characterizing efficient incentive-compatible coordination mechanisms.

Suggested Citation

  • Roger B. Myerson, 1983. "Bayesian Equilibrium and Incentive-Compatibility: An Introduction," Discussion Papers 548, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
  • Handle: RePEc:nwu:cmsems:548
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    File URL: http://www.kellogg.northwestern.edu/research/math/papers/548.pdf
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    References listed on IDEAS

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    1. Holmstrom, Bengt & Myerson, Roger B, 1983. "Efficient and Durable Decision Rules with Incomplete Information," Econometrica, Econometric Society, vol. 51(6), pages 1799-1819, November.
    2. Harris, Milton & Raviv, Artur, 1981. "Allocation Mechanisms and the Design of Auctions," Econometrica, Econometric Society, vol. 49(6), pages 1477-1499, November.
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    Cited by:

    1. Myerson, R B, 1986. "Acceptable and Predominant Correlated Equilibria," International Journal of Game Theory, Springer;Game Theory Society, pages 133-154.
    2. Kevin D. Cotter, 1989. "Communication Equilibria with Large State Spaces," Discussion Papers 862, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
    3. Winand Emons, 2005. "Perjury versus Truth Revelation: Quantity or Quality of Testimony," Journal of Institutional and Theoretical Economics (JITE), Mohr Siebeck, Tübingen, vol. 161(3), pages 392-392, September.
    4. Roland Strausz, 2009. "Entrepreneurial Financing, Advice, and Agency Costs," Journal of Economics & Management Strategy, Wiley Blackwell, pages 845-870.
    5. Robert Cooter & Winand Emons, 2003. "Truth-Revealing Mechanisms for Courts," Journal of Institutional and Theoretical Economics (JITE), Mohr Siebeck, Tübingen, pages 259-259.
    6. Kay Mitusch & Roland Strausz, 2005. "Mediation in Situations of Conflict and Limited Commitment," Journal of Law, Economics, and Organization, Oxford University Press, vol. 21(2), pages 467-500, October.
    7. Kevin Cotter, 1988. "Similarity of Correlated Equilibria," Discussion Papers 781, Northwestern University, Center for Mathematical Studies in Economics and Management Science.

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