Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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Question
What are the sub games in the following game? Find all subgame perfect Nash equilibria (SPNE)
Expert Solution
Step 1
Subgame Perfect Nash Equilibrium (SPNE):
SPNE is a dynamic game concept. It represents those equilibria of dynamic games which are consistent throughout all subgames of a game. When reached the SPNE outcome, all players are doing the best they can and optimizing their strategies, given the other's strategies.
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