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= Consider the following strategic situation. Agent 1 has three possible choices: A {5, 6, 7} and agent 2 has three possible choices: A

 

= Consider the following strategic situation. Agent 1 has three possible choices: A {5, 6, 7} and agent 2 has three possible choices: A = {4,5,6}. Let a and a2 be representative actions of 1 and 2. Agents payoff functions are: u (a1, a2) = a1 (4+ a2a) u(a1, a2) = a (4 + a-a) Agent 1 moves first, selecting an action from A. Then, having observed the choice of 1, agent 2 makes a choice from A2. Draw the extensive form of the game and solve by backward induction.

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