We consider a dynamic game with asymmetric information where each player observes privately a noisy version of a (hidden) state of the world V, resulting in dependent private observations. We study structured perfect Bayesian equilibria that use private beliefs in their strategies as sufficient statistics for summarizing their observation history. The main difficulty in finding the appropriate sufficient statistic (state) for the structured strategies arises from the fact that players need to construct (private) beliefs on other players private beliefs on V, which in turn would imply that an infinite hierarchy of beliefs on beliefs needs to be constructed, rendering the problem unsolvable. We show that this is not the case: each players belief on other players beliefs on V can be characterized by her own belief on V and some appropriately defined public belief. We then specialize this setting to the case of a Linear Quadratic Gaussian (LQG) non-zero-sum game and we characterize linear structured PBE that can be found through a backward/forward algorithm akin to dynamic programming for the standard LQG control problem. Unlike the standard LQG problem, however, some of the required quantities for the Kalman filter are observation-dependent and thus cannot be evaluated off-line through a forward recursion.
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