Lecture 22
 - Repeated Games: Cheating, Punishment, and Outsourcing

Lecture 22 - Repeated Games: Cheating, Punishment, and Outsourcing

Author: William Sheppard June 8, 2018 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, 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. Then we discuss less draconian punishments, and find there is a trade off between the severity of punishments and the required probability that relationships will endure. We apply this idea to a moral-hazard problem that arises with outsourcing, and find that the high wage premiums found in foreign sectors of emerging markets may be reduced as these relationships become more stable.

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 3 - Iterative Deletion and the Median-Voter Theorem [not-audio_url] [/not-audio_url]

Duration: 1:01:19
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 descripti…
Lecture 2 - Putting Yourselves into Other People's Shoes [not-audio_url] [/not-audio_url]

Duration: 1:08:48
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 putt…
Introduction: Five First Lessons [not-audio_url] [/not-audio_url]

Duration: 1:08:32
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 plausib…