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Five Legitimate Definitions of Correlated Equilibrium in Games with Incomplete Information

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  • FORGES , Françoise

    (CORE, Université catholique de Louvain, B-1348 Louvain-la-Neuve, Belgium)

Abstract

Aumann (1987)'s theorem shows that correlated equilibrium is an expression of Bayesian rationality. We extend this result to games with incomplete information. First, we rely on Harsanyi (1967)'s model and represent the underlying multiperson decision problem as a fixed game with imperfect information. We survey four definitions of correlated equilibrium which have appeared in the literature. We show that these definitions are not equivalent to each other. We prove that one of them fits Aumann's framework; the "agents normal form correlated equilibrium" is an expression of Bayesian rationality in games with incomplete information. We also follow a "universal Bayesian approach" based on Mertens and Zamir (1985)'s construction of the "universal beliefs space". Hierarchies of beliefs over independent variables (states of nature) and dependent variables (actions) are then constructed simultaneously. We establish that the universal set of Bayesian solutions satisfies another extension of Aumann's theorem. We get the following corollary : once the types of the players are not fixed by the model, the various definitions of correlated equilibrium previously considered are equivalent.

Suggested Citation

  • FORGES , Françoise, 1993. "Five Legitimate Definitions of Correlated Equilibrium in Games with Incomplete Information," LIDAM Discussion Papers CORE 1993009, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
    • Handle: RePEc:cor:louvco:1993009
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