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.
Video is embedded from external source so embedding is not available.
Video is embedded from external source so download is not available.
No content is added to this lecture.
This video is a part of a lecture series from of Yale