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What is Backward Induction?
It is the procedure of reasoning backward for some particular time intervals, and the important thing is considerations are done by making decisions from the end of a situation. It is perfect way to get the consequences of optimal actions in a sequence. There are various conditions when assumptions are going on and what will be the action as well as the best result can be known. If the last or end of a condition is assumed as the first condition, then what will be the result from second to the last and also important to know that which one would be regarded as the best and perfect one for anyone.
It is completely applicable to a game theory, where proposal of a player can easily be accepted or rejected by the other. In case of his acceptance, the profit can be made for both players, but in case of rejection the chances of loss. This is a unique equilibrium of subgame theory and the perfect result may vary after going through the each proposal.
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