Question
Consider the following extensive form game. There are two players - Player 1 and Player 2. Player 1 begins the game , by choosing one
Consider the following extensive form game. There are two
players - Player 1 and Player 2. Player 1 begins the game , by choosing
one of the two possible actions Y and N. If Player 1 chooses Y , the
game ends and each player gets a pay-o of 1, i.e., the resulting payo
vector is (1; 1). If on the other hand, Player 1 chooses N, the game
moves to the decision node where Player 2 makes his move. At this
decision node player 2 has to choose a number x such that 0 < x < 1.
(Please be careful: the inequalities are strict, so choice of x = 0 or x = 1
3
are not allowed.) Once Player 2 chooses a number x, the game ends
with each player getting a payo of x, i.e., the resulting pay-o vector
is (x; x). Find a subgame perfect equilibrium (SPE) in this game.
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