Adaptive expectations and dynamic adjustment in noncooperative games with incomplete information

This paper is concerned with the analysis of a Nash equilibrium of a noncooperative game. It can be shown that, without complete information about the other players' objectives or interests, the group of players, as a whole, can reach a Nash equilibrium by adopting a class of adaptive expectation and dynamic adjustment processes. It is shown that, if the expectation and adjustment processes are made continuously, the stability of the overall dynamic process is independent of the specific mechanisms of the expectation and the adjustment, but depends on the properties of each player's objective or payoff function. If, however, expectation and adjustment processes are made at discrete time intervals, the stability of the discrete process depends on the speed of adjustment chosen by each player.This research was supported by ONR Contract No. N00014-75-C-0738. The authors are indebted to the referee for several valuable comments and suggestions for improvement.