Game Theory (ECON 159) We consider games in which players move sequentially rather than simultaneously, starting with a game involving a borrower and a lender. We analyze the game using "backward induction." The game features moral hazard: the borrower will not repay a large loan. We discuss possible remedies for this kind of problem. One remedy involves incentive design: writing contracts that give the borrower an incentive to repay. Another involves commitment strategies; in this case providing collateral. We consider other commitment strategies such as burning boats. But the key lesson of the day is the idea of backward induction. 00:00 - Chapter 1. Sequential Games: Backward Induction 17:57 - Chapter 2. Sequential Games: Moral Hazard 29:50 - Chapter 3. Sequential Games: Incentive Design 44:29 - Chapter 4. Sequential Games: Commitment Strategies 01:01:06 - Chapter 5. Sequential Games: Backward Induction Is Really Important Complete course materials are available at the Open Yale Courses website: http://open.yale.edu/courses This course was recorded in Fall 2007.
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Tags: Backward induction Collateral Commitment Extensive form games Lender Borrower Nash equilbrium Sequential
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Lec 1 - Introduction: five first lessons
Lec 2 - Putting yourselves into other people's shoes
Lec 3 - Iterative deletion and the median-voter theorem
Lec 4 - Best responses in soccer and business partnerships
Lec 5 - Nash equilibrium: bad fashion and bank runs
Lec 6 - Nash equilibrium: dating and Cournot
Lec 7 - Nash equilibrium: shopping, standing and voting on a line
Lec 8 - Nash equilibrium: location, segregation and randomization
Lec 9 - Mixed strategies in theory and tennis
Lec 10 - Mixed strategies in baseball, dating and paying your taxes
Lec 11 - Evolutionary stability: cooperation, mutation, and equilibrium
Lec 12 - Evolutionary stability: social convention, aggression, and cycles
Lec 14 - Backward induction: commitment, spies, and first-mover advantages
Lec 15 - Backward induction: chess, strategies, and credible threats
Lec 16 - Backward induction: reputation and duels
Lec 17 - Backward induction: ultimatums and bargaining
Lec 18 - Imperfect information: information sets and sub-game perfection
Lec 19 - Subgame perfect equilibrium: matchmaking and strategic investments
Lec 20 - Subgame perfect equilibrium: wars of attrition
Lec 21 - Repeated games: cooperation vs. the end game
Lec 22 - Repeated games: cheating, punishment, and outsourcing
Lec 23 - Asymmetric information: silence, signaling and suffering education
Lec 24- Asymmetric information: auctions and the winner's curse