COMPLETE INFORMATION

'Complete information' is a term used in economics and game theory to describe an economic situation or game in which knowledge about other market participants or players is available to all participants. Every player knows the payoffs and strategies available to other players.
Complete information is one of the theoretical pre-conditions of an efficient perfectly competitive market. In a sense it is a requirement of the assumption also made in economic theory that market participants act rationally. If a game is not of complete information, then the individual players would not be able to predict the effect their actions would have on the others players (even if the actor presumed other players would act rationally).

Contents

Complete vs. perfect information

Certain information

See also

References

Complete vs. perfect information

Although similar, complete and perfect information are not identical. Complete information refers to a state of knowledge about the structure of the game, while not necessarily having knowledge inside the game. So for example, one may have complete information in the context of a Prisoner's Dilemma, but nonetheless this is a game of imperfect information since one does not know the action of the other player. Despite this distinction, it is useful to remember that any game of incomplete information can be transformed, terminology-wise, into a game of imperfect information. One simply includes nature as a player in the game and conditions payoffs on nature's unknown moves.
Examples of incomplete but perfect information are more difficult. Suppose you are playing a game of chess against an opponent who will be paid some substantial amount of money if a particular event happens (an arrangement of pieces, for instance), but you do not know what the event is. In this case you have perfect information, since you know what each move of the opponent is. However, since you do not know the payoff function of the other player it is a game of incomplete information.

Certain information

A distinction is made by some authors of game theory literature between complete and ''certain'' information. In this context, complete information is used to describe a game in which all players know the ''type'' of all the other players, i.e. they know the payoffs and strategy spaces of the other players. Certain information is used to describe a game in which all players know exactly what game they are playing in the sense that they know what the payoff of playing a particular strategy will be given the strategies played by other players. An equivalent way of making the distinction, particularly helpful in the context of extensive form games, is to define a game of incomplete information as any game in which nature moves first and to define a game of uncertain information as any game in which nature moves after the players have moved.

See also

★ market impact

References

★ Fudenberg, D. and Tirole, J. (1993) ''Game Theory''. MIT Press. (see Chapter 6, sect 1)

★ Gibbons, R. (1992) ''A primer in game theory''. Harvester-Wheatsheaf. (see Chapter 3)