A challenger runs against an incumbent in a political party nomination. Each candidate can choose to either follow the party platform or deviate from the party platform. The incumbent chooses first. o If they both "follow" or both "deviate", the incumbent wins. Otherwise, the challenger wins. o The payoff for winning is 10. o A candidate that "deviates" gets a deduction of 5 in payoff.

A challenger runs against an incumbent in a political party nomination. Each candidate can choose to either follow the party platform or deviate from the party platform. The incumbent chooses first. o If they both "follow" or both "deviate", the incumbent wins. Otherwise, the challenger wins. o The payoff for winning is 10. o A candidate that "deviates" gets a deduction of 5 in payoff.

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Question

Using backward induction, solve the Vote Payoffs Game for Two Candidates.
A challenger runs against an incumbent in a political party nomination. Each candidate can choose to
either follow the party platform or deviate from the party platform. The incumbent chooses first.
o If they both "follow" or both "deviate", the incumbent wins. Otherwise, the challenger wins.
o The payoff for winning is 10.
o A candidate that "deviates" gets a deduction of 5 in payoff.
Draw the extensive form and solve by backward induction.

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