Subgame Perfect Equilibrium and Backward Induction Homework Help

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What Is Subgame Perfect Equilibrium?

Subgame perfect equilibrium is a refinement of Nash equilibrium and has close proximity with the game theory. In other words, it represents the Nash equilibrium of every subgame, which also means that if every player played small games that comprised of a single part of the larger game, then thebehavior exhibited by the players would represent the Nash equilibrium of that smaller game.

Role of Backward Integration

The process of reasoning backwards in time from the end of a situation, or a problem/issue in order to determine the sequence of optimal actions is termed as backward integration. The process helps in determining the appropriate action at a particular point, and keeps on moving backward until all best actions for the given situations are determined.

Backward integration and subgame perfect equilibrium go head to head, as reasoning back through backward integration helps in defining the appropriate action a player or the final mover should take in each point, or situation to maximize his/her performance/output.

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