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Bayesian games extend traditional game theory by incorporating incomplete information, allowing players to have private knowledge about their own types or payoffs. This framework enables the analysis of strategic interactions where players form beliefs and update them using Bayes' rule, leading to equilibria that reflect uncertainty and information asymmetry.
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Nash Equilibrium is a fundamental concept in game theory where each player's strategy is optimal given the strategies of all other players, meaning no player can benefit by unilaterally changing their strategy. It is used to predict the outcome of strategic interactions in competitive environments, assuming that all players are rational and have complete knowledge of the game structure.
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Game theory is a mathematical framework used for analyzing strategic interactions where the outcome for each participant depends on the actions of all involved. It provides insights into competitive and cooperative behaviors in economics, politics, and beyond, helping to predict and explain decision-making processes in complex scenarios.
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Belief systems are structured frameworks of ideas and values that shape an individual's or group's understanding of the world, influencing their perceptions, behaviors, and interactions. They are deeply rooted in cultural, religious, philosophical, and personal contexts, and can be both consciously and unconsciously held, impacting decision-making and social dynamics.
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Probability theory is a branch of mathematics that deals with the analysis and interpretation of random phenomena and the likelihood of various outcomes. It provides a framework for quantifying uncertainty and making predictions based on incomplete information, which is fundamental in fields ranging from statistics to quantum mechanics.
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Rational Expectations is an economic theory suggesting that individuals form forecasts about the future based on all available information, leading to predictions that are, on average, accurate. This assumption implies that markets are efficient, as people use information optimally and adjust their expectations accordingly, minimizing systematic errors over time.
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Information Economics studies how information and information systems affect an economy and economic decisions. It examines the impact of information asymmetry, signaling, and screening on market behavior and outcomes, highlighting the critical role of information in achieving efficient market functioning.
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