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.

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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