[39] Consider the following dynamic game: Player 1 moves first, choosing between strategies A and B. If 1 chooses A, then player 2 moves, choosing between strategies C and D. If 1 chooses B, then 2 chooses between E and F. If 2 chooses E, the game ends. If 2 chooses F, the game continues, with 1 choosing between G and H. The payoffs are indicated in parentheses at the bottom of the game tree, with 1's payoffs 1st and 2's payoffs 2nd.

ENGR.ECONOMIC ANALYSIS
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ISBN:9780190931919
Author:NEWNAN
Publisher:NEWNAN
Chapter1: Making Economics Decisions
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[39] Consider the following dynamic game: Player 1 moves first, choosing between strategies A and B.
If 1 chooses A, then player 2 moves, choosing between strategies C and D. If 1 chooses B, then 2 chooses
between E and F. If 2 chooses E, the game ends. If 2 chooses F, the game continues, with 1 choosing
between G and H. The payoffs are indicated in parentheses at the bottom of the game tree, with 1's payoffs
1st and 2's payoffs 2nd.
(3.8)
(8,3)
B
E
(5.5)
G
H
(2,10) (1.0)
Using backwards induction, the
solution to the game leads player
2 to choose:
A.
C
B.
D
C.
E
D. F
Transcribed Image Text:[39] Consider the following dynamic game: Player 1 moves first, choosing between strategies A and B. If 1 chooses A, then player 2 moves, choosing between strategies C and D. If 1 chooses B, then 2 chooses between E and F. If 2 chooses E, the game ends. If 2 chooses F, the game continues, with 1 choosing between G and H. The payoffs are indicated in parentheses at the bottom of the game tree, with 1's payoffs 1st and 2's payoffs 2nd. (3.8) (8,3) B E (5.5) G H (2,10) (1.0) Using backwards induction, the solution to the game leads player 2 to choose: A. C B. D C. E D. F
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