Use the following code to embed this video. See our usage guide for more details on embedding.
Paste this in your document somewhere (closest to the closing body tag is preferable):
Paste this inside your HTML body, where you want to include the widget:
<div class="amara-embed" data-url="http://www.youtube.com/watch?v=5tGh7wd2zOU" data-team="veduca"></div>
Game Theory (ECON 159)
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.
00:00 - Chapter 1. Sequential Games: Backward Induction
17:57 - Chapter 2. Sequential Games: Moral Hazard
29:50 - Chapter 3. Sequential Games: Incentive Design
44:29 - Chapter 4. Sequential Games: Commitment Strategies
01:01:06 - Chapter 5. Sequential Games: Backward Induction Is Really Important
Complete course materials are available at the Open Yale Courses website: http://open.yale.edu/courses
This course was recorded in Fall 2007.