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.

You can listen to Lecture 13 - Sequential Games: Moral Hazard, Incentives, and Hungry Lions online on Radio and Podcast. Open the player on this page to stream the available audio.

Lecture 13 - Sequential Games: Moral Hazard, Incentives, and Hungry Lions is an episode from Yale Open Courses ECON 159: Game Theory by William Sheppard.

This episode is 01:10:32 long.

This episode was published on Jun 6, 2018.

Yes. Use the heart button on the episode page to add it to your favorite episodes list.

Yes. This page shows related episodes from Yale Open Courses ECON 159: Game Theory when more episodes are available from the podcast feed.