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He was the recipient of the Nobel Memorial Prize in Economic Sciences in 1994. Harsanyi is best known for his contributions to the study of game theory and its application to economics, specifically for his developing the highly innovative analysis of games of incomplete information, so-called Bayesian games.
In economics, the theory of rational inattention deals with the effects of the cost of information acquisition on decision making. For example, when the information required for a decision is costly to acquire, the decision makers may rationally take decisions based on incomplete information, rather than incurring the cost to get the complete information.
In game theory, an information set represents all possible points (or decision nodes) in a game that a given player might be at during their turn, based on their current knowledge and observations. These nodes are indistinguishable to the player due to incomplete information about previous actions or the state of the game .
Consider a network game of local provision of public good [4] when agent's actions are strategic substitutes, (i.e. the benefit of the individual from undertaking a certain action is not greater if his partners undertake the same action) thus, in the case of strategic substitutes, equilibrium actions are non-increasing in player's degrees.
Information economics or the economics of information is the branch of microeconomics that studies how information and information systems affect an economy and economic decisions. [ 1 ] One application considers information embodied in certain types of commodities that are "expensive to produce but cheap to reproduce."
One early commercial application of information theory was in the field of seismic oil exploration. Work in this field made it possible to strip off and separate the unwanted noise from the desired seismic signal. Information theory and digital signal processing offer a major improvement of resolution and image clarity over previous analog methods.
In economics and game theory, complete information is an economic situation or game in which knowledge about other market participants or players is available to all participants. The utility functions (including risk aversion), payoffs, strategies and "types" of players are thus common knowledge .
Price theory is a field of economics that uses the supply and demand framework to explain and predict human behavior. It is associated with the Chicago School of Economics. Price theory studies competitive equilibrium in markets to yield testable hypotheses that can be rejected. Price theory is not the same as microeconomics.