Business Intelligence

An Approach To Communication Equilibrium

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Executive Summary

The Nash equilibrium concept may be extended gradually when the rules of the game are interpreted in a wider and wider sense, so as to allow preplay or even intraplay communication. A well-known extension of the Nash equilibrium is Aumann's correlated equilibrium, which depends only on the normal form of the game. Two other solution concepts for multistage games are proposed here: the extensive form correlated equilibrium, where the players can observe private extraneous signals at every stage and the communication equilibrium, where the players are furthermore allowed to transmit inputs to an appropriate device at every stage.

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