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Consider the location game (in Chapter 8) with nine pos- sible regions at which vendors may locate. Suppose that, rather than the players moving simultaneously
Consider the location game (in Chapter 8) with nine pos- sible regions at which vendors may locate. Suppose that, rather than the players moving simultaneously and independently, they move sequentially. First, vendor 1 selects a lo- cation. Then, after observing the decision of vendor 1, vendor 2 chooses where to locate. Use backward induction to solve this game (and identify the subgame perfect Nash equi- librium). Remember that you need to specify the second vendor's sequentially optimal strategy (his best move conditional on every different action of vendor 1)
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