Decisions with Incomplete Information
Navigate strategic situations where you don't know everything. Learn Harsanyi's framework for games with incomplete information, Bayesian updating, and reasoning about what others know.
"Harsanyi's insight was that we must reason about what others know, and what they know about what we know. This is the foundation of strategic thinking under uncertainty."
Real strategic situations involve uncertainty - about your opponent's type, their payoffs, their beliefs about you. John Harsanyi won the Nobel Prize for showing how to analyze such games rigorously.
Harsanyi's key insight was the concept of "types." A player's type determines their payoffs and beliefs. Nature chooses types according to a common prior probability distribution. This transforms games of incomplete information into games of imperfect information - where players know the structure but not the realization.
Bayesian updating allows rational agents to revise beliefs as they observe actions. What someone does reveals information about who they are. Strategic signaling and screening emerge from this framework.
In this topic, you'll learn to analyze situations with uncertainty, update beliefs rationally, understand signaling and screening, and make better decisions when you don't have complete information. Harsanyi's framework is essential for real-world strategic thinking.
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Types capture private information in a tractable way (Harsanyi)
Rational agents update beliefs according to Bayes' rule
Actions reveal information about types (signaling)
Designing mechanisms can elicit truthful revelation (screening)
Uncertainty about others' beliefs creates strategic complexity
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