19. Subgame perfect equilibrium: matchmaking and strategic investments
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19. Subgame perfect equilibrium: matchmaking and strategic investments
Game Theory (ECON 159) We analyze three games using our new solution concept, subgame perfect equilibrium (SPE). The first game involves players' trusting that others will not make mistakes. It has three Nash equilibria but only one is consistent with backward induction. We show the other two Nash equilibria are not subgame perfect: each fails ...
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