Solving Two Sided Incomplete Information Games with Bayesian Iterative Conjectures Approach
This paper proposes a way to solve two (and multiple) sided incomplete information games which generally generates a unique equilibrium. The approach uses iterative conjectures updated by game theoretic and Bayesian statistical decision theoretic reasoning. Players in the games form conjectures about what other players want to do, starting from first order uninformative conjectures and keep updating with games theoretic and Bayesian statistical decision theoretic reasoning until a convergence of conjectures is achieved. The resulting convergent conjectures and the equilibrium (which is named Bayesian equilibrium by iterative conjectures) they supported form the solution of the game. The paper gives two examples which show that the unique equilibrium generated by this approach is compellingly intuitive and insightful. The paper also solves an example of a three sided incomplete information simultaneous game.
|Date of creation:||01 Mar 2012|
|Date of revision:||12 Jul 2012|
|Contact details of provider:|| Postal: |
Web page: https://mpra.ub.uni-muenchen.de
More information through EDIRC
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Schweizer, Urs, 1989. "Litigation and Settlement under Two-Sided Incomplete Information," Review of Economic Studies, Wiley Blackwell, vol. 56(2), pages 163-77, April.
- Cramton, Peter C, 1984.
"Bargaining with Incomplete Information: An Infinite-Horizon Model with Two-Sided Uncertainty,"
Review of Economic Studies,
Wiley Blackwell, vol. 51(4), pages 579-93, October.
- Peter Cramton, 1984. "Bargaining with Incomplete Information: An Infinite-Horizon Model with Two-Sided Uncertainty," Papers of Peter Cramton 84res, University of Maryland, Department of Economics - Peter Cramton, revised 09 Jun 1998.
- Mariotti, Marco, 1995. "Is Bayesian Rationality Compatible with Strategic Rationality?," Economic Journal, Royal Economic Society, vol. 105(432), pages 1099-1109, September.
- John C. Harsanyi & Reinhard Selten, 1988. "A General Theory of Equilibrium Selection in Games," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262582384, June.
When requesting a correction, please mention this item's handle: RePEc:pra:mprapa:40061. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Ekkehart Schlicht)
If references are entirely missing, you can add them using this form.