HIST 116 - Lecture 2 - Being a British Colonist

Professor Freeman discusses what it meant to be a British colonist in America in the eighteenth century. She explains how American colonists had deep bonds of tradition and culture with Great Britain. She argues that, as British colonists with a strong sense of their British liberties, settlers in America valued their liberties above all else. She also explains that many Americans had a sense of inferiority when they compared their colonial lifestyles to the sophistication of Europe.

ECON 159 - 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; that is, as if you knew your initial estimate of the common value was the highest. This leads you to bid much below your initial estimate. Then we discuss four forms of auction: first-price sealed-bid, second-price sealed-bid, open ascending, and open descending auctions.

ECON 159 - 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, information is verifiable. Here, the failure explicitly to reveal information can be informative, and hence verifiable information tends to come out even when you don’t want it to. We consider examples of such information unraveling. Then we move to unverifiable information.

ECON 159 - 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 subgame perfect equilibrium today. We find that the grim strategy forms such an equilibrium provided that we are patient and the game has a high probability of continuing. We discuss what this means for the personal relationships of seniors in the class.

ECON 159 - 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 problem is that, in the last stage, since there is then is future, there is no incentive to cooperate, and hence the incentives unravel from the back. We related this to the real-world problems of a lame duck leader and of maintaining incentives for those close to retirement.

ECON 159 - 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 caused by irrationality or by players’ having other goals like pride or reputation. But we argue that long, costly fights should be expected in these games even if everyone is rational and has standard goals.

ECON 159 - 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 subgame perfect: each fails to induce Nash in a subgame. The second game involves a matchmaker sending a couple on a date. There are three Nash equilibria in the dating subgame.

ECON 159 - 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 of imperfect information; and also lets us formally define subgames. We then extend our definition of a strategy to imperfect information games, and use this to construct the normal form (the payoff matrix) of such games.

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