Three techniquesillustrated by this example1.How to use backward induction to solve an extensive form game for a subgame perfect Nash equilibrium.2.How to construct the normal or strategic form from the extensive form (or game tree) representation of the game.3.How to find the (pure-strategy) Nash equilibria in a normal form game by locating strategy pairs for the players that are best replies to one another. (This technique applies to allnormal form games, not just ones derived from extensive form games.)
Use backward induction to find subgame perfect Nash equilibriumTo apply backward induction, we first look at the final decision nodes in the tree, that is, nodes after which there are no further actions to be chosen by any player. This game has two such nodes, the one at which 2 chooses between Top and Bottomand the one at which 1 chooses between Airand Ground. What would be the best action for each player if play were to reach either of these nodes?
This preview has intentionally blurred sections.
Sign up to view the full version.