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Nash+equilibrium+and+SPNE

Nash+equilibrium+and+SPNE - Nash equilibrium and subgame...

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Nash equilibrium and subgame perfect Nash equilibrium in normal and extensive for games An example solved in detail
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Three techniques illustrated by this example 1. How to use backward induction to solve an extensive form game for a subgame perfect Nash equilibrium. 2. How to construct the normal or strategic form from the extensive form (or game tree) representation of the game. 3. How to find the (pure-strategy) Nash equilibria in a normal form game by locating strategy pairs for the players that are best replies to one another. (This technique applies to all normal form games, not just ones derived from extensive form games.)
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Use backward induction to find subgame perfect Nash equilibrium To apply backward induction, we first look at the final decision nodes in the tree, that is, nodes after which there are no further actions to be chosen by any player. This game has two such nodes, the one at which 2 chooses between Top and Bottom and the one at which 1 chooses between Air and Ground . What would be the best action for each player if play were to reach either of these nodes?
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