Explore a 27-minute video lecture that delves into a game of incomplete information where uncertainty over costs impacts bargaining and potential conflict. Learn how to solve scenarios where one side lacks knowledge about their opponent's cost structure. Discover why uncertainty can lead to war and how proposers might opt for risky demands that low-cost types reject. Follow along as the lecture breaks down the model's setup, analyzes decision-making processes for different cost types, and visualizes accept/reject decisions. Understand the proposer's dilemma, examine why extreme demands are suboptimal, and grasp the concept of unnecessary concessions. Conclude by identifying optimal demands, visualizing utility functions, and exploring the risk-return tradeoff in bargaining situations.
Uncertainty Over Costs - Bargaining Over War
Overview
Syllabus
Introduction.
The Model's Setup.
The High Cost Type's Accept/Reject Decision.
The Low Cost Type's Accept/Reject Decision.
Visualizing the Accept/Reject Decision.
The Proposer's Dilemma.
Why Very Small Demands Aren't Optimal.
Why Very Large Demands Aren't Optimal.
Unnecessary Concession to High Cost Types.
The Only Two Possible Optimal Demands.
The Optimal Demand.
Visualizing the Utility Function.
The Risk-Return Tradeoff.
Taught by
William Spaniel
