ECON 159 - Lecture 18 - Imperfect Information: Information Sets and Sub-Game Perfection

Lecture 18 - Imperfect Information: Information Sets and Sub-Game Perfection

Overview

We consider games that have both simultaneous and sequential components, combining ideas from before and after the midterm. We represent what a player does not know within a game using an information set: a collection of nodes among which the player cannot distinguish. This lets us define games of imperfect information; and also lets us formally define subgames. We then extend our definition of a strategy to imperfect information games, and use this to construct the normal form (the payoff matrix) of such games. A key idea here is that it is information, not time per se, that matters. We show that not all Nash equilibria of such games are equally plausible: some are inconsistent with backward induction; some involve non-Nash behavior in some (unreached) subgames. To deal with this, we introduce a more refined equilibrium notion, called sub-game perfection.

Resources

Assignment

Strategies and Games: Theory And Practice. (Dutta): Chapter 13

Strategy: An Introduction to Game Theory. (Watson): Chapters 15-16, 19

Problem Set 8

Course Media

Transcript

html

Audio

mp3

Low Bandwidth Video

mov [100MB]

High Bandwidth Video

mov [500MB]