Saturday, August 22, 2009

Yale Lectures on Game Theory

In a continuing example of the rather amazing trend of giving away whole lecture courses from elite institutions entirely free, Benjamin Polak's Yale lecture course on Game Theory is available below. For those who have done or are doing my behavioural economics course, I would particularly recommend Lecture 17 on ultimatums and bargaining.


Liam Delaney said...

i love the ultimatum game as a teaching tool. some of the most interesting experiences ive had giving lectures happen once the class thinks about why people reject ultimatum offers.

Keith said...

I remember having a 99-1 divide rejected in class; indignation is a powerful factor in these games. Nominal amounts seems to matter more than proportional allocation: Would anyone really reject €1,000 out of a €100,000 split? Elster covers the topic quite well.

Liam Delaney said...

Yes, I remember that class. One guy made a great argument as to why you would never reject if the stakes got high. We then get talking about wage bargains and the same guy basically said he would rather see his business go to the wall than make unfair concessions to the unions! I think the basic ultimatum game with some variations is a good way to think about an awful lot of structures in economics, and how they are influenced by framing, judgment biases, discounting, emotion, identity, values and so on.

Keith said...

I still wonder whether envy and indignation in the Ultimatum Game are best represented by a constant or a proportion of the amount in question.

Say two players have an amount V to share. Player 1 offers v-1 to Player 2 and keeps v for themselves. If Player 2 accepts, the pay-off is (v, v-1). Consider the inclusion of envy, e. Player 2 has a choice of (0, 0) or (v, (v-1)-e(v)). With indignation, let's say z, (0, 0) becomes (0, z) or (0, z(v)) to make the pay-off relative to the loss incurred by 1 as a consequence of their paltry offer.

In games where you're dividing small pay-offs (maybe €1) z is so high as to reject all offers (except where v = 0). (Social) Heuristics/Norms might have a part to play here. Boundaries of what's acceptable would be interesting to record when playing these games in class.

I think the third person in that video makes an interesting point. Rather than saying, 'I'll offer the other guy some small amount as it's better to him than nothing' he offers 50-50, because, to him (the person making the offer) half is a better pay-off than nothing if/when the other guy rejects (and seems to have been enlightened as to the general feeling of fairness in the class from the previous two groups).

Loss aversion and money illusion are (probably) big factors alongside disgust (emotions) and pride (identity) in wage bargaining.

jim turner said...

What's great about this course is the lecturing style and entry level of understanding.
As he says, the course is difficult but fun, and this really comes across even through itunes podcast recordings.