Transcription of Introduction to Game Theory Lecture 4: Extensive Games and ...
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Extensive GamesSubgame Perfect EquilibriumBackward InductionIllustrationsExtensions and to Game TheoryLecture 4: Extensive Games and Subgame PerfectEquilibriumHaifeng HuangUniversity of California, MercedShanghai, Summer GamesSubgame Perfect EquilibriumBackward InductionIllustrationsExtensions and ControversiesExtensive Games with perfect information What we have studied so far are strategic-form Games , whereplayers simultaneously choose an action (or a mixed strategy)once and for all. Now we study Extensive Games (dynamicgames), where players move sequentially. An example: A challenger decides whether or not to enter (amarket); if the challenger enters, the incumbent decides tofight or GamesSubgame Perfect EquilibriumBackward InductionIllustrationsExtensions and ControversiesConcepts Some concepts: Theempty history( ): the start of the game Aterminal history: a sequence of actions that specifies whatmay happen in the game from the start of the game to anaction that ends the game.
• Person 1 decides to exert high effort (E = H) or low effort (E = L), H > L, in producing a pie. H leads to a big pie with size cH, and L leads to a small pie with size cL. Person 2 then chooses to offer person 1 with x and keep for himself 1−x. Person 1 can accept or reject the offer. If she rejects, neither gets any of the pie.
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