Bayesian Nash Equilibrium

Bayesian Nash Equilibrium is a concept in game theory that occurs in strategic situations where players have incomplete information about each other. Each player has beliefs about other players’ types (like their preferences or possible actions) and makes decisions to maximize their own payoff based on these beliefs. An equilibrium is reached when each player's strategy is optimal, given their beliefs and the strategies of others. In this context, players use Bayes' rule to update their beliefs as they receive new information, leading to a stable outcome where no player has an incentive to change their strategy unilaterally.