Imperfect and Incomplete Information
Introducing the Muddle
Part I
We all face lots of uncertainty, every day, yet it doesn’t paralyze us - we still make decisions in the presence of uncertainty and we Muddle through. The type of uncertainty and the types of problems we have combine to make some truly magnificent conundrums in The Muddle, a three part series of posts:
This post: Imperfect and incomplete information (game theory)
Next post: Technical and Complex Problems (Adaptive Leadership)
Third post: The Muddle - both concepts combined: how to understand uncertainty we might have about our problem types
In game theory, there are two types of uncertainty, imperfect and incomplete information.
With imperfect information, the result of an event is unknown to one or more actors in the game, including all of the actors. Those actors have imperfect information about the state of the game.
With incomplete information, a feature of the game may not be known by one or more actors, including all of the actors. Those actors have incomplete information about the nature, structure or rules of the game.
These terms can seem abstract. It doesn’t help that economists used two near synonyms for different concepts. Here are a few examples from different types of games to ground the concepts:
You are playing a card game:
You have imperfect information if:
You don’t know what cards your opponent has
You don’t know what the next card is
You have incomplete information if:
You don’t know whose turn it is
Half the table bets, the other half builds houses of cards
You are playing a game with dice:
Imperfect information:
The die is covered, you don’t know what was rolled
Incomplete information:
The die has unrecognizable symbols instead of numbers
You are playing fetch with the dog:
Imperfect: Where’s the ball? Who has the ball? Good dog!
Incomplete: Where’s the cat? Who buried the cat? Bad dog!
Raffle or Lottery:
Imperfect: Will your number be called?
Incomplete: How many people bought tickets?
At an auction:
Imperfect: What is the minimum bid?
Incomplete: Smiling and nodding counts as a bid?!?
Jarts:
Your opponent has thrown a Jart, but you’ve lost it in the sun…
You’re standing in a Jart field but don’t know what Jarts are…
Board Game:
Imperfect: B7, hit?
Incomplete: Are my parents letting me win?
Russian Roulette:
Imperfect: Which chamber is the bullet in?
Incomplete: Is this played with a revolver or automatic?
Of course, game theory isn’t just about games, it is about strategic choice. The games above are metaphors for the strategic choices we make every day. Knowing what type(s) of uncertainty(-ies) you’re dealing with is an important first step to understanding your problem space.
In the first type of uncertainty, you may know the rules of a game perfectly and still have imperfect information due to unknowns within the game. These are known unknowns. Insurance companies and casinos make their living off of estimating and managing this type of uncertainty.
In the second type of uncertainty, you may not actually know the game you are playing (or think you are playing a different game than what is actually being played). These are unknown unknowns. Tax havens, corrupt politicians and human traffickers make their living working at the edges of what is permissable, not knowing what they are doing is part of the value of what they do.
Both types of uncertainty are important! The prize pool for the world series of poker in 2019 was over $80 million. The average cost of an emergency room visit in the US is about $3000 (please read about Jarts if you don’t know what they are and stay safe!).
If you have good examples of imperfect and incomplete information - known unknowns and unknown unknowns - feel free to drop them in comments below.
From here, you might be interested in technical versus complex problems, the next post in this series. Or, if you’re familiar with those concepts already, you might want to skip to Part III, The Muddle, where we put both parts together.
Before you go there, though, please note that our family motto has always been “never let the children win” - so those victories were earned (I think).
Part II: Technical and Complex Problems (from Adaptive Leadership)
Part III: The Muddle - Uncertainty about nature of problems
