I'm currently writing my thesis in econ and have encountered a bit of game theory which im not too well acquainted with. The problem is as follows:
Suppose there are two players, In the first round each player can invest in information for some cost C. In the second round players choose if they which to enter the contest or not. What of player j's choice in the first round has to be known to player i (for there to be a solution to the model)? his set of strategies or which strategy he actually chose to play?
Thanks in advance.
What's usually required is that each player must know the set of strategies. It is a game of imperfect information, also known as a Bayesian game. What is unkown is the random state of nature, which is often thought of as the types of the other players. Put another way, you can get an equilibrium if you don't know the other player's choice,--do you go to the symphony or the wrestling match, but generally not if you don't even know how many differ spots the other player is considering.