Summary
Senator John Houston's decision to pass no tax on tips has significantly benefited families in the service industry, according to a bartender who shared their personal experience. The bartender emphasized the importance of tips for their livelihood and expressed gratitude for Houston's support, calling for more leaders like him who make a tangible difference in people's lives.
In a recent class discussion, the focus shifts to game theory, specifically the concepts of imperfect information and strategies within games. The instructor introduces the idea of sub-game perfection, refining the Nash equilibrium concept to ensure players act optimally in every sub-game. Through interactive examples, students engage in a game titled "Don't Screw Up," where they analyze decision-making processes and trust dynamics between players. The instructor highlights the importance of backward induction in determining optimal strategies and emphasizes the need for players to trust one another to achieve the best outcomes.
The session culminates in a more complex example involving a matchmaker scenario, illustrating how strategic decisions can influence outcomes in competitive environments. The discussion underscores the significance of considering the reactions of other players when making decisions, as neglecting these strategic effects can lead to suboptimal choices. The instructor concludes with a reminder that understanding these dynamics is crucial for effective decision-making in both academic and real-world contexts.
Show Notes
Game Theory (ECON 159)Uploaded 20-11-08We analyze three games using our new solution concept, subgame perfect equilibrium (SPE). The first game involves players' trusting that others will not make mistakes. It has three Nash equilibria but only one is consistent with backward induction. We show the other two Nash equilibria are not subgame perfect: each fails to induce Nash in a subgame. The second game involves a matchmaker sending a couple on a date. There are three Nash equilibria in the dating subgame. We construct three corresponding subgame perfect equilibria of the whole game by rolling back each of the equilibrium payoffs from the subgame. Finally, we analyze a game in which a firm has to decide whether to invest in a machine that will reduce its costs of production. We learn that the strategic effects of this decision--its effect on the choices of other competing firms--can be large, and if we ignore them we will make mistakes.00:00 - Chapter 1. Sub-game Perfect Equilibria: Example27:22 - Chapter 2. Sub-game Perfect Equilibria: Matchmaking34:31 - Chapter 3. Matchmaking: SPEs of the Game49:37 - Chapter 4. Sub-game Perfect Equilibria: Strategic Investments01:13:15 - Chapter 5. Strategic Investments: DiscussionComplete course materials are available at the Yale Online website: online.yale.eduThis course was recorded in Fall 2007. Learn more about your ad choices. Visit megaphone.fm/adchoices Learn more about your ad choices. Visit megaphone.fm/adchoices
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Game Theory (ECON 159)Uploaded 20-11-08We 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 the prizes are small in relation to the accumulated costs. These could be caused by irrationality or by players' having other goals like pride or reputation. But we argue that long, costly fights should be expected in these games even if everyone is rational and has standard goals. We show this first in a two-period version of the game and then in a potentially infinite version. There are equilibria in which the game ends fast without a fight, but there are also equilibria that can involve long fights. The only good news is that, the longer the fight and the higher the cost of fighting, the lower is the probability of such a fight.00:00 - Chapter 1. Wars of Attrition: The Rivalry Game17:39 - Chapter 2. Wars of Attrition: Real World Examples24:04 - Chapter 3. Wars of Attrition: Analysis47:53 - Chapter 4. Wars of Attrition: Discussion of SPEs01:06:54 - Chapter 5. Wars of Attrition: GeneralizationComplete course materials are available at the Yale Online website: online.yale.eduThis course was recorded in Fall 2007. Learn more about your ad choices. Visit megaphone.fm/adchoices Learn more about your ad choices. Visit megaphone.fm/adchoices
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Game Theory (ECON 159)Uploaded 20-11-08We 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.00:00 - Chapter 1. Ultimatum Games: Why Backward Induction Fails Here14:15 - Chapter 2. Bargaining Games: Setup and Generalization 47:44 - Chapter 3. Bargaining Games: Summary of Proof of Generalization54:29 - Chapter 4. Bargaining Games: Assumptions and ConclusionsComplete course materials are available at the Yale Online website: online.yale.eduThis course was recorded in Fall 2007. Learn more about your ad choices. Visit megaphone.fm/adchoices Learn more about your ad choices. Visit megaphone.fm/adchoices
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