Bayesian Equilibrium and Incentive-Compatibility: An Introduction

Roger Myerson

No 548, Discussion Papers from Northwestern University, Center for Mathematical Studies in Economics and Management Science

Abstract: This paper is an introduction to the analysis of games with incomplete information, using a Bayesian model. the logical foundations of the Bayesian model are discussed. To describe rational behavior of players in a Bayesian game, two basic solution concerts are present: Bayesian equilibrium, for games in which the players cannot communicate; and Bayesian incentive-compatibility, for games in which the players can communicate. The concept of virtual utility is developed as a tool for characterizing efficient incentive-compatible coordination mechanisms.

Date: 1983-02
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