ECON 159: Game Theory
Lecture 13 - Sequential Games: Moral Hazard, Incentives, and Hungry Lions. We consider games in which players move sequentially rather than simultaneously, starting with a game involving a borrower and a lender. We analyze the game using "backward induction." The game features moral hazard: the borrower will not repay a large loan. We discuss possible remedies for this kind of problem. One remedy involves incentive design: writing contracts that give the borrower an incentive to repay. Another involves commitment strategies; in this case providing collateral. We consider other commitment strategies such as burning boats. But the key lesson of the day is the idea of backward induction. (from oyc.yale.edu)
| Lecture 13 - Sequential Games: Moral Hazard, Incentives, and Hungry Lions |
| Time | Lecture Chapters |
| [00:00:00] | 1. Sequential Games: Backward Induction |
| [00:17:57] | 2. Sequential Games: Moral Hazard |
| [00:29:50] | 3. Sequential Games: Incentive Design |
| [00:44:29] | 4. Sequential Games: Commitment Strategies |
| [01:01:06] | 5. Sequential Games: Backward Induction Is Really Important |
| References |
| Lecture 13 - Sequential Games: Moral Hazard, Incentives, and Hungry Lions Instructor: Professor Ben Polak. Resources: Blackboard Notes Lecture 13 [PDF]. Transcript [html]. Audio [mp3]. Download Video [mov]. |
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