Lecture 17
 - Backward Induction: Ultimatums and Bargaining

Lecture 17 - Backward Induction: Ultimatums and Bargaining

Author: William Sheppard June 8, 2018 Duration: 1:10:44
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 dollar today. We learn that, if players are equally patient, if offers can be in rapid succession, and if each side knows how much the game is worth to the other side, then the first offer is for an equal split of the pie and this offer is accepted. But this result depends on those assumptions; for example, bargaining power may depend on wealth.

Ever wondered how the strategies behind a high-stakes poker game, a political campaign, and a corporate merger might actually be connected? Yale Open Courses ECON 159: Game Theory, presented by William Sheppard, pulls back the curtain on the fascinating science of strategic decision-making. This isn't just an academic lecture series; it's a deep dive into the frameworks that explain how we interact when our choices directly impact others. Each episode unpacks core concepts-from Nash equilibrium and backward induction to credibility and signaling-using clear explanations that make these powerful ideas accessible. You’ll hear these theories brought to life through engaging examples that stretch far beyond textbook economics. Discussions might pivot from classic parlor games to analysis drawn from film narratives, historical events, and current political dilemmas, showing just how pervasive strategic thinking is in our world. The content is drawn directly from the renowned Yale College course, capturing the dynamic atmosphere of a campus classroom. For anyone curious about the hidden rules of competition and cooperation in everyday life, this podcast serves as a compelling guide. Tune in to train your mind to see the strategic layers in everything from simple interactions to complex global systems.
Author: Language: English Episodes: 24

Yale Open Courses ECON 159: Game Theory
Podcast Episodes
Lecture 24
 - Asymmetric Information: Auctions and the Winner's Curse [not-audio_url] [/not-audio_url]

Duration: 1:02:28
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 a…
Lecture 22
 - Repeated Games: Cheating, Punishment, and Outsourcing [not-audio_url] [/not-audio_url]

Duration: 1:15:46
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,…
Lecture 21
 - Repeated Games: Cooperation vs. the End Game [not-audio_url] [/not-audio_url]

Duration: 1:15:18
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 prisone…
Lecture 20
 - Subgame Perfect Equilibrium: Wars of Attrition [not-audio_url] [/not-audio_url]

Duration: 1:15:36
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…
Lecture 16
 - Backward Induction: Reputation and Duels [not-audio_url] [/not-audio_url]

Duration: 1:15:40
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…