Games with incomplete information

Abstract

This chapter is devoted to the basic concepts in dynamic games with incomplete in­ formation. As in the case of complete information, Bayesian Nash equilibrium allows players to take suboptimal actions in information sets that are not reached in equilib­ rium. This problem addressed by sequential equilibrium, which explicitly requires that the players play a best reply at every information set (sequential rationality) and that the players' beliefs are "consistent" with the other players' strategies. Here, I will define sequential equilibrium and apply it to some important games.