At this equilibrium it is common knowledge that type 1 people are always honest and that type 2 people always cheat a little. But at no encounter does either party know who he is dealing with. Behaviour according to type is therefore what emerges at this equilibrium.

DEFINE: Explains how a pooling equilibrium works: type labels are common knowledge even though individuals never know who they're dealing with. Builds on: "Reputation is a public inference from observed conduct to character."

Diego Gambetta, Trust - Making and Breaking…, loc. 873