Perfect information

Perfect information

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In game theory
Game theory
Game theory is a mathematical method for analyzing calculated circumstances, such as in games, where a person’s success is based upon the choices of others...

, perfect information describes the situation when a player has available the same information to determine all of the possible games (all combinations of legal moves) as would be available at the end of the game.

In game theory, a game is described as a game of perfect information if perfect information is available for all moves. Chess
Chess
Chess is a two-player board game played on a chessboard, a square-checkered board with 64 squares arranged in an eight-by-eight grid. It is one of the world's most popular games, played by millions of people worldwide at home, in clubs, online, by correspondence, and in tournaments.Each player...

 is an example of a game with perfect information as each player can see all of the pieces on the board at all times. Other examples of perfect games include tic tac toe, irensei
Irensei
Irensei is an abstract strategy board game. It is traditionally played with Go pieces on a Go board , but any equipment with which Go can be played is also suitable for Irensei....

, and go
Go (board game)
Go , is an ancient board game for two players that originated in China more than 2,000 years ago...

. Games with perfect information represent a small subset of games. Card games where each player's cards are hidden from other players are examples of games of imperfect information.


In microeconomics
Microeconomics
Microeconomics is a branch of economics that studies the behavior of how the individual modern household and firms make decisions to allocate limited resources. Typically, it applies to markets where goods or services are being bought and sold...

, a state of perfect information is assumed in some models of perfect competition
Perfect competition
In economic theory, perfect competition describes markets such that no participants are large enough to have the market power to set the price of a homogeneous product. Because the conditions for perfect competition are strict, there are few if any perfectly competitive markets...

. That is, assuming that all agents are rational
Perfect rationality
In economics and game theory, the participants are sometimes considered to have perfect rationality: that is, they always act in a way that maximizes their utility, and are capable of arbitrarily complex deductions towards that end...

 and have perfect information, they will choose the best products, and the market will reward those who make the best products with higher sales. Perfect information would practically mean that all consumers know all things, about all products, at all times (including knowing the probabilistic outcome of all future events) , and therefore always make the best decision regarding purchase. In competitive markets, unlike game-theoretic models, perfect competition does not require that agents have complete knowledge about the actions of others; all relevant information is reflected in price
Price
-Definition:In ordinary usage, price is the quantity of payment or compensation given by one party to another in return for goods or services.In modern economies, prices are generally expressed in units of some form of currency...

s.

See also

  • Complete information
    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...

  • Information asymmetry
    Information asymmetry
    In economics and contract theory, information asymmetry deals with the study of decisions in transactions where one party has more or better information than the other. This creates an imbalance of power in transactions which can sometimes cause the transactions to go awry, a kind of market failure...

  • Extensive form game
    Extensive form game
    An extensive-form game is a specification of a game in game theory, allowing explicit representation of a number of important aspects, like the sequencing of players' possible moves, their choices at every decision point, the information each player has about the other player's moves when he...

  • Perfect competition
    Perfect competition
    In economic theory, perfect competition describes markets such that no participants are large enough to have the market power to set the price of a homogeneous product. Because the conditions for perfect competition are strict, there are few if any perfectly competitive markets...


Further reading

  • Fudenberg, D. and Tirole, J.
    Jean Tirole
    Jean Marcel Tirole is a French professor of economics. He works on industrial organization, game theory, banking and finance, and economics and psychology. Tirole is director of the Jean-Jacques Laffont Foundation at the Toulouse School of Economics, and scientific director of the Industrial...

     (1993) Game Theory, MIT Press. (see Chapter 3, sect 2.2)
  • Gibbons, R. (1992) A primer in game theory, Harvester-Wheatsheaf. (see Chapter 2)
  • Luce, R.D.
    R. Duncan Luce
    Robert Duncan Luce is the Distinguished Research Professor of Cognitive Science at the University of California, Irvine.Luce received a B.S. in Aeronautical Engineering from the Massachusetts Institute of Technology in 1945, and PhD in Mathematics from the same university in 1950...

     and Raiffa, H.
    Howard Raiffa
    Howard Raiffa is the Frank P. Ramsey Professor of Managerial Economics, a joint chair held by the Business School and the Kennedy School of Government at Harvard University...

     (1957) Games and Decisions: Introduction and Critical Survey, Wiley & Sons (see Chapter 3, section 2)
  • The Economics of Groundhog Day by economist D.W. MacKenzie, using the 1993 film Groundhog Day
    Groundhog Day (film)
    Groundhog Day is a 1993 American comedy film directed by Harold Ramis, starring Bill Murray and Andie MacDowell. It was written by Ramis and Danny Rubin, based on a story by Rubin....

    to argue that perfect information, and therefore perfect competition, is impossible.