PODCAST · education
Yale Open Courses ECON 159: Game Theory
by William Sheppard
About the CourseThis course is an introduction to game theory and strategic thinking. Ideas such as dominance, backward induction, Nash equilibrium, evolutionary stability, commitment, credibility, asymmetric information, adverse selection, and signaling are discussed and applied to games played in class and to examples drawn from economics, politics, the movies, and elsewhere.Course StructureThis Yale College course, taught on campus twice per week for 75 minutes, was recorded for Open Yale Courses in Fall 2007.https://oyc.yale.edu/economics/econ-159
Episodes
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Lecture 24 - Asymmetric Information: Auctions and the Winner's Curse
We discuss auctions. We first distinguish two extremes: common values and private values. We hold a common value auction in class and discover the winner’s curse, the winner tends to overpay. We discuss why this occurs and how to avoid it: you should bid as if you knew that your bid would win…
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Lecture 23 - Asymmetric Information: Silence, Signaling and Suffering Education
We look at two settings with asymmetric information; one side of a game knows something that the other side does not. We should always interpret attempts to communicate or signal such information taking into account the incentives of the person doing the signaling. In the first setting…
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Lecture 22 - Repeated Games: Cheating, Punishment, and Outsourcing
In business or personal relationships, promises and threats of good and bad behavior tomorrow may provide good incentives for good behavior today, but, to work, these promises and threats must be credible. In particular, they must come from equilibrium behavior tomorrow, and hence form part of a...
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Lecture 21 - Repeated Games: Cooperation vs. the End Game
We discuss repeated games, aiming to unpack the intuition that the promise of rewards and the threat of punishment in the future of a relationship can provide incentives for good behavior today. In class, we play prisoners’ dilemma twice and three times, but this fails to sustain cooperation. The...
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Lecture 20 - Subgame Perfect Equilibrium: Wars of Attrition
We first play and then analyze wars of attrition; the games that afflict trench warfare, strikes, and businesses in some competitive settings. We find long and damaging fights can occur in class in these games even when the prizes are small in relation to the accumulated costs. These could be...
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Lecture 19 - Subgame Perfect Equilibrium: Matchmaking and Strategic Investments
We analyze three games using our new solution concept, subgame perfect equilibrium (SPE). The first game involves players’ trusting that others will not make mistakes. It has three Nash equilibria but only one is consistent with backward induction. We show the other two Nash equilibria are not...
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Lecture 18 - Imperfect Information: Information Sets and Sub-Game Perfection
We consider games that have both simultaneous and sequential components, combining ideas from before and after the midterm. We represent what a player does not know within a game using an information set: a collection of nodes among which the player cannot distinguish. This lets us define games…
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Lecture 17 - Backward Induction: Ultimatums and Bargaining
We develop a simple model of bargaining, starting from an ultimatum game (one person makes the other a take it or leave it offer), and building up to alternating offer bargaining (where players can make counter-offers). On the way, we introduce discounting: a dollar tomorrow is worth less than a...
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Lecture 16 - Backward Induction: Reputation and Duels
In the first half of the lecture, we consider the chain-store paradox. We discuss how to build the idea of reputation into game theory; in particular, in setting like this where a threat or promise would otherwise not be credible. The key idea is that players may not be completely certain about...
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Lecture 15 - Backward Induction: Chess, Strategies, and Credible Threats
We first discuss Zermelo’s theorem: that games like tic-tac-toe or chess have a solution. That is, either there is a way for player 1 to force a win, or there is a way for player 1 to force a tie, or there is a way for player 2 to force a win. The proof is by induction. Then we formally define…
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Lecture 14 - Backward Induction: Commitment, Spies, and First-Mover Advantages
We first apply our big idea–backward induction–to analyze quantity competition between firms when play is sequential, the Stackelberg model. We do this twice: first using intuition and then using calculus. We learn that this game has a first-mover advantage, and that it comes commitment and from...
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Lecture 13 - Sequential Games: Moral Hazard, Incentives, and Hungry Lions
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...
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Lecture 12 - Evolutionary Stability: Social Convention, Aggression, and Cycles
We apply the idea of evolutionary stability to consider the evolution of social conventions. Then we consider games that involve aggressive (Hawk) and passive (Dove) strategies, finding that sometimes, evolutionary populations are mixed. We discuss how such games can help us to predict how…
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Lecture 11 - Evolutionary Stability: Cooperation, Mutation, and Equilibrium
We discuss evolution and game theory, and introduce the concept of evolutionary stability. We ask what kinds of strategies are evolutionarily stable, and how this idea from biology relates to concepts from economics like domination and Nash equilibrium. The informal argument relating these ideas...
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Lecture 10 - Mixed Strategies in Baseball, Dating and Paying Your Taxes
We develop three different interpretations of mixed strategies in various contexts: sport, anti-terrorism strategy, dating, paying taxes and auditing taxpayers. One interpretation is that people literally randomize over their choices. Another is that your mixed strategy represents my belief about...
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Lecture 9 - Mixed Strategies in Theory and Tennis
We continue our discussion of mixed strategies. First we discuss the payoff to a mixed strategy, pointing out that it must be a weighed average of the payoffs to the pure strategies used in the mix. We note a consequence of this: if a mixed strategy is a best response, then all the pure…
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Lecture 8 - Nash Equilibrium: Location, Segregation and Randomization
We first complete our discussion of the candidate-voter model showing, in particular, that, in equilibrium, two candidates cannot be too far apart. Then we play and analyze Schelling’s location game. We discuss how segregation can occur in society even if no one desires it. We also learn that...
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Lecture 7 - Nash Equilibrium: Shopping, Standing and Voting on a Line
We first consider the alternative “Bertrand” model of imperfect competition between two firms in which the firms set prices rather than setting quantities. Then we consider a richer model in which firms still set prices but in which the goods they produce are not identical. We model the firms as...
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Lecture 6 - Nash Equilibrium: Dating and Cournot Overview
We apply the notion of Nash Equilibrium, first, to some more coordination games; in particular, the Battle of the Sexes. Then we analyze the classic Cournot model of imperfect competition between firms. We consider the difficulties in colluding in such settings, and we discuss the welfare...
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Lecture 5 - Nash Equilibrium: Bad Fashion and Bank Runs
We first define formally the new concept from last time: Nash equilibrium. Then we discuss why we might be interested in Nash equilibrium and how we might find Nash equilibrium in various games. As an example, we play a class investment game to illustrate that there can be many equilibria in…
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Lecture 4 - Best Responses in Soccer and Business Partnerships
We continue the idea (from last time) of playing a best response to what we believe others will do. More particularly, we develop the idea that you should not play a strategy that is not a best response for any belief about others’ choices. We use this idea to analyze taking a penalty kick in...
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Lecture 3 - Iterative Deletion and the Median-Voter Theorem
We apply the main idea from last time, iterative deletion of dominated strategies, to analyze an election where candidates can choose their policy positions. We then consider how good is this classic model as a description of the real political process, and how we might build on it to improve it....
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Lecture 2 - Putting Yourselves into Other People's Shoes
At the start of the lecture, we introduce the “formal ingredients” of a game: the players, their strategies and their payoffs. Then we return to the main lessons from last time: not playing a dominated strategy; and putting ourselves into others’ shoes. We apply these first to defending the Roman...
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Introduction: Five First Lessons
We introduce Game Theory by playing a game. We organize the game into players, their strategies, and their goals or payoffs; and we learn that we should decide what our goals are before we make choices. With some plausible payoffs, our game is a prisoners’ dilemma. We learn that we should never...
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ABOUT THIS SHOW
About the CourseThis course is an introduction to game theory and strategic thinking. Ideas such as dominance, backward induction, Nash equilibrium, evolutionary stability, commitment, credibility, asymmetric information, adverse selection, and signaling are discussed and applied to games played in class and to examples drawn from economics, politics, the movies, and elsewhere.Course StructureThis Yale College course, taught on campus twice per week for 75 minutes, was recorded for Open Yale Courses in Fall 2007.https://oyc.yale.edu/economics/econ-159
HOSTED BY
William Sheppard
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Yale Open Courses ECON 159: Game Theory currently has 24 episodes available on PodParley. New episodes are automatically indexed when they're published to the podcast feed.
What is Yale Open Courses ECON 159: Game Theory about?
About the CourseThis course is an introduction to game theory and strategic thinking. Ideas such as dominance, backward induction, Nash equilibrium, evolutionary stability, commitment, credibility, asymmetric information, adverse selection, and signaling are discussed and applied to games played in...
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Yale Open Courses ECON 159: Game Theory has 24 episodes. Check the episode list to see recent publication dates and frequency.
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Yale Open Courses ECON 159: Game Theory is created and hosted by William Sheppard.
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