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from Part III - Incomplete Information
Published online by Cambridge University Press: 17 June 2025
This chapter focuses on games with incomplete information, where the players may be uncertain about the utility functions of the other players. It starts by explaining how a game with incomplete information can be viewed as a collection of one-person decision problems. Subsequently, it is shown how belief hierarchies about choices and utility functions can be visualized by means of a beliefs diagram, and mathematically encoded by means of an epistemic model with types. This is used to provide a formal definition of common belief in rationality. It is shown that the choices which are possible under common belief in rationality can be characterized by the generalized iterated strict dominance procedure. The chapter finally turns to the scenario of fixed beliefs on utilities, where the players hold some pre-specified beliefs about the opponents’ utility functions.
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