November 2007 – Yale Podcast Network

22 – The Struggle for Hegemony in Fourth-Century Greece (cont.)

By yalepodcasts | November 29, 2007

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In this lecture, Professor Kagan examines the continuation of Spartan tyranny over the Greek poleis and the response of the Greek world. According to Professor Kagan, it became clear that the Greek poleis needed to do something to check the power of Sparta. So, Thebes, Argos, Corinth, and Athens along with some of the smaller poleis joined together to fight Sparta in the Corinthian War. The war ended in a stalemate, but now the Persians were afraid of the growth of Athenian naval power. So, the king made an alliance with Sparta to bring about the King’s Peace, which emphasized Greek autonomy and which had the effect of breaking up all alliances, except the Peloponnesian League. After this fact, Sparta continued in its tyrannical behavior.

22 – Repeated Games: Cheating, Punishment, and Outsourcing

By yalepodcasts | November 28, 2007

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In business or personal relationships, promises and threats of good and bad behavior tomorrow may provide good incentives for good behavior today, but, to work, these promises and threats must be credible. In particular, they must come from equilibrium behavior tomorrow, and hence form part of a subgame perfect equilibrium today. We find that the grim strategy forms such an equilibrium provided that we are patient and the game has a high probability of continuing. We discuss what this means for the personal relationships of seniors in the class. Then we discuss less draconian punishments, and find there is a trade off between the severity of punishments and the required probability that relationships will endure. We apply this idea to a moral-hazard problem that arises with outsourcing, and find that the high wage premiums found in foreign sectors of emerging markets may be reduced as these relationships become more stable.

21 – The Struggle for Hegemony in Fourth-Century Greece

By yalepodcasts | November 27, 2007

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In this lecture, Professor Kagan describes the aftermath of the Peloponnesian War and how the Spartans began to dominate other Greek poleis, instead of liberating them. The Spartan general Lysander at this point not only grows in influence and power, but also follows an aggressive plan to establish pro-Spartan, oligarchical governments. However, according to Professor Kagan, this fact angered many cities. Therefore, Thrasybulus, along with the help of other poleis, resisted Spartan rule. Eventually he opposed Sparta at Phyle and in time reestablished the democracy of Athens.

21 – Repeated Games: Cooperation vs. the End Game

By yalepodcasts | November 26, 2007

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We discuss repeated games, aiming to unpack the intuition that the promise of rewards and the threat of punishment in the future of a relationship can provide incentives for good behavior today. In class, we play prisoners’ dilemma twice and three times, but this fails to sustain cooperation. The problem is that, in the last stage, since there is then is future, there is no incentive to cooperate, and hence the incentives unravel from the back. We related this to the real-world problems of a lame duck leader and of maintaining incentives for those close to retirement. But it is possible to sustain good behavior in early stages of some repeated games (even if they are only played a few times) provided the stage games have two or more equilibria to be used as rewards and punishments. This may require us to play bad equilibria tomorrow. We relate this to the trade off between ex ante and ex post efficiency in the law. Finally, we play a game in which the players do not know when the game will end, and we start to consider strategies for this potentially infinitely repeated game.

20 – The Peloponnesian War, Part II (cont.)

By yalepodcasts | November 15, 2007

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In this lecture, Professor Kagan examines Pericles as a general. First, he describes Pericles’ strategy of war and then he evaluates this strategy. According to Professor Kagan, Pericles’ strategy was characterized by being both defensive and rational. It was defensive, because the Athenians did not engage the Spartans in a traditional hoplite battle, and it was rational, because Pericles assumed that the Spartans would cease fighting when they realized that the Athenians did not have to fight a land battle, since they had a walled city and a navy. On its surface, this strategy seems reasonable, but Professor Kagan points out that there were two flaws. First, the Athenians did not have an offensive plan: that is, a plan to deter the Spartans from quitting the war. Second, Pericles failed to realize that war is not always rational.

20 – Subgame Perfect Equilibrium: Wars of Attrition

By yalepodcasts | November 14, 2007

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We 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.

19 – The Peloponnesian War, Part II

By yalepodcasts | November 13, 2007

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In this lecture, Professor Kagan focuses on the causes of the Peloponnesian War and the possible motivations for Thucydides’ book, The History of the Peloponnesian War. Concerning the first point, Professor Kagan parts ways with Thucydides and argues that the war was not inevitable and that the Athenians under Pericles followed a policy of deterrence, which was aimed at peace. Similarly, he points out that there were a number of Spartans who did not want war as well. Therefore, according to this line of reasoning, war broke out due to a number of factors that were avoidable. Concerning the second point, Professor Kagan argues that Thucydides was a revisionist historian. In other words, Thucydides was writing not as a disinterested historian, but as a historian with a point to make, namely, that the war was inevitable and that Athens was only a democracy in name under Pericles. Finally, Professor Kagan acknowledges that his two points are debatable.

19 – Subgame Perfect Equilibrium: Matchmaking and Strategic Investments

By yalepodcasts | November 12, 2007

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We 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.

18 – The Peloponnesian War, Part I (cont.)

By yalepodcasts | November 8, 2007

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In this lecture, Professor Kagan describes the aftermath of the Thirty Years Peace. He argues that the Peace had the potential to keep peace between Athens and Sparta due to the arbitration clause. In addition, he argues that during this time, Athens sends various diplomatic messages to the wider Greek world stating their intentions for peace, such as the Panhellenic venture to establish Thurii. However, this peace is seriously challenged when Corinth and Corcyra come into conflict over Epidamnus. At this point, Athens could make an alliance with Corcyra and run the risk of angering Sparta or allow Corinth to potentially take over Corcyra’s navy and change the naval balance of power. Athens decides on a defensive alliance.

18 – Imperfect Information: Information Sets and Sub-Game Perfection

By yalepodcasts | November 7, 2007

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We consider games that have both simultaneous and sequential components, combining ideas from before and after the midterm. We represent what a player does not know within a game using an information set: a collection of nodes among which the player cannot distinguish. This lets us define games of imperfect information; and also lets us formally define subgames. We then extend our definition of a strategy to imperfect information games, and use this to construct the normal form (the payoff matrix) of such games. A key idea here is that it is information, not time per se, that matters. We show that not all Nash equilibria of such games are equally plausible: some are inconsistent with backward induction; some involve non-Nash behavior in some (unreached) subgames. To deal with this, we introduce a more refined equilibrium notion, called sub-game perfection.