The centipede game, first introduced by Robert Rosenthal in 1981, is an extensive form game in which two players take turns choosing either to take a slightly larger share of an increasing pot, or to pass the pot to the other player. In other words, player 1 chooses between D (Down) and A (Across), where D is pocketing the pot and A is passing the pot to the player 2. Similarly, player 2 chooses between A and D. The payoffs are arranged so that if one passes the pot to one's opponent and the opponent takes the pot on the next round, one receives slightly less than if one had taken the pot on this round. A 2 A 1 A 2 A 1 A (3,5) D Ꭰ D Ꭰ D Ꭰ (1,0) (0,2) (3,1) (2,4) (4,3) 1. Find the subgame perfect Nash Equilibrium using backward induction.

The centipede game, first introduced by Robert Rosenthal in 1981, is an extensive form game in which two players take turns choosing either to take a slightly larger share of an increasing pot, or to pass the pot to the other player. In other words, player 1 chooses between D (Down) and A (Across), where D is pocketing the pot and A is passing the pot to the player 2. Similarly, player 2 chooses between A and D. The payoffs are arranged so that if one passes the pot to one's opponent and the opponent takes the pot on the next round, one receives slightly less than if one had taken the pot on this round. A 2 A 1 A 2 A 1 A (3,5) D Ꭰ D Ꭰ D Ꭰ (1,0) (0,2) (3,1) (2,4) (4,3) 1. Find the subgame perfect Nash Equilibrium using backward induction.

Exploring Economics

8th Edition

ISBN:9781544336329

Author:Robert L. Sexton

Publisher:Robert L. Sexton

Chapter15: Oligopoly And Strategic Behavior

Section: Chapter Questions

Problem 17P

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