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Consider a twoplayer, sequentialmove game where each player can choose to play right or left. Player 1 moves first. Player 2 observes player 1's actual
Consider a twoplayer, sequentialmove game where each player can choose to play right or left. Player 1 moves first. Player 2 observes player 1's actual move and then decides to move right or left. If player 1 moves right, player 1 receives $0 and player 2 receives $25. If both players move left, player 1 receives $5 and player 2 receives $10. If player 1 moves left and player 2 moves right, player 1 receives $20 and player 2 receives $20. (a) Write this game in extensive form (decision tree) . (.25) (b) Find the rollback equilibrium outcomes to this game. (.25) (c) Suppose Player 2 threatens to move left if Player 1 moves left. Can this strategic move change the outcome of the game? Explain. (.25) (d) What could Player 2 do to increase the credibility of the strategic move in part (c)? (.25)
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