Solving Two Sided Incomplete Information Games with Bayesian Iterative Conjectures Approach
University of Nottingham Malaysia Campus
July 13, 2012
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.
Number of Pages in PDF File: 5working papers series
Date posted: July 14, 2012
© 2013 Social Science Electronic Publishing, Inc. All Rights Reserved.
This page was processed by apollo6 in 0.281 seconds