Epistemic Game Theory

Definition ∞ Epistemic game theory is a branch of game theory that formally analyzes players’ beliefs, knowledge, and reasoning processes within strategic interactions. It extends traditional game theory by considering not only what players do, but also what they believe about other players’ actions, beliefs, and rationality. This framework provides tools to model how information and its dissemination influence strategic choices. It is particularly relevant in decentralized systems where transparency and information asymmetry play significant roles.
Context ∞ The application of epistemic game theory in blockchain contexts often helps understand how participants in decentralized networks form expectations about validator behavior or smart contract execution. A key area of study involves analyzing how public ledger information affects strategic decision-making in proof-of-stake or decentralized finance protocols. Future research aims to apply these models to predict network stability and design more robust incentive mechanisms that account for varied levels of participant knowledge and reasoning.