1. 11. While at the airport, you hear over the loudspeaker an offer to be bumped off your current flight in exchange for $100 travel credit.

After it becomes clear nobody will take this offer, the offer is increased to $200. A few minutes later, the airline offers $300;

then $400, and so on. Individually, each passenger wants to take the offer, but collectively it is best for people to hold out. The strategic dynamic can be modeled with a two player “centipede game” (the name is based on the shape of the game tree), shown below. Use backward induction to determine the equilibrium in this game.