Two friends are deciding where to go for dinner. There are three choices, which we label A, B, and C. Max prefers A to B to C. Sally prefers B to A to C. To decide which restaurant to go to, the friends adopt the following procedure: First, Max eliminates one of three choices. Then, Sally decides among the two remaining choices. Thus, Max has three strategies (eliminate A, eliminate B, and eliminate C). For each of those strategies, Sally has two choices (choose among the two remaining). a.Write down the extensive form (game tree) to represent this game. b.If Max acts non-strategically, and makes a decision in the first period to eliminate his least desirable choice, what will the final decision be? c.What is the subgame-perfect equilibrium of the above game? d. Does your answer in b. differ from your answer in c.? Explain why or why not.
Two friends are deciding where to go for dinner. There are three choices, which we label A, B, and C.
Max prefers A to B to C. Sally prefers B to A to C.
To decide which restaurant to go to, the friends adopt the following procedure:
First, Max eliminates one of three choices.
Then, Sally decides among the two remaining choices.
Thus, Max has three strategies (eliminate A, eliminate B, and eliminate C). For each of those strategies, Sally has two choices (choose among the two remaining).
a.Write down the extensive form (game tree) to represent this game.
b.If Max acts non-strategically, and makes a decision in the first period to eliminate his least desirable choice, what will the final decision be?
c.What is the subgame-perfect equilibrium of the above game?
d. Does your answer in b. differ from your answer in c.? Explain why or why not.
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