Lecture 5 - Nash Equilibrium: Bad Fashion and Bank Runs

Lecture 5 - Nash Equilibrium: Bad Fashion and Bank Runs

Author: William Sheppard June 3, 2018 Duration: 1:09:13
We first define formally the new concept from last time: Nash equilibrium. Then we discuss why we might be interested in Nash equilibrium and how we might find Nash equilibrium in various games. As an example, we play a class investment game to illustrate that there can be many equilibria in social settings, and that societies can fail to coordinate at all or may coordinate on a bad equilibrium. We argue that coordination problems are common in the real world. Finally, we discuss why in such coordination problems–unlike in prisoners’ dilemmas–simply communicating may be a remedy.

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 9
 - Mixed Strategies in Theory and Tennis [not-audio_url] [/not-audio_url]

Duration: 1:12:52
We continue our discussion of mixed strategies. First we discuss the payoff to a mixed strategy, pointing out that it must be a weighed average of the payoffs to the pure strategies used in the mix. We note a consequence…
Lecture 8
 - Nash Equilibrium: Location, Segregation and Randomization [not-audio_url] [/not-audio_url]

Duration: 1:13:49
We first complete our discussion of the candidate-voter model showing, in particular, that, in equilibrium, two candidates cannot be too far apart. Then we play and analyze Schelling’s location game. We discuss how segre…
Lecture 7 - Nash Equilibrium: Shopping, Standing and Voting on a Line [not-audio_url] [/not-audio_url]

Duration: 1:11:21
We first consider the alternative “Bertrand” model of imperfect competition between two firms in which the firms set prices rather than setting quantities. Then we consider a richer model in which firms still set prices…
Lecture 6 - Nash Equilibrium: Dating and Cournot
Overview [not-audio_url] [/not-audio_url]

Duration: 1:12:06
We apply the notion of Nash Equilibrium, first, to some more coordination games; in particular, the Battle of the Sexes. Then we analyze the classic Cournot model of imperfect competition between firms. We consider the d…
Lecture 4 - Best Responses in Soccer and Business Partnerships [not-audio_url] [/not-audio_url]

Duration: 1:12:04
We continue the idea (from last time) of playing a best response to what we believe others will do. More particularly, we develop the idea that you should not play a strategy that is not a best response for any belief ab…