Рет қаралды 10
Based on chapter 2 of Bowles and Halliday (2022), we show how to use backward induction to solve sequential games. We show the Nash equilibrium that results when players anticipate what their opponents will do when they form accurate beliefs about those actions and their best responses.
A note to other instructors: We believe students need to economize on attention in their learning. Though it would be more accurate to refer to "subgame perfect Nash equilbrium", we decided additional jargon was unnecessary for students to learn in order to arrive at the important insights from backward induction. This is a pedagogical choice we have made--remember that students are also trying to optimize their learning with scarce time and limited attention.