ECON 159 - Lecture 15 - Backward Induction: Chess, Strategies, and Credible Threats

Lecture 15 - Backward Induction: Chess, Strategies, and Credible Threats

Overview

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 and informally discuss both perfect information and strategies in such games. This allows us to find Nash equilibria in sequential games. But we find that some Nash equilibria are inconsistent with backward induction. In particular, we discuss an example that involves a threat that is believed in an equilibrium but does not seem credible.

Resources

Assignment

Strategies and Games: Theory And Practice. (Dutta): Chapters 11-12

Strategy: An Introduction to Game Theory. (Watson): Chapter 21

Course Media

Transcript

html

Audio

mp3

Low Bandwidth Video

mov [100MB]

High Bandwidth Video

mov [500MB]