4. Consider the location game (in Chapter 8) with nine pos- sible regions at whi

Question

4. Consider the location game (in Chapter 8) with nine pos- sible regions at which vendors may locate. Suppose that rather than th and inde- pendently, they move sequentially. First, vendor 1 selects a location. Then, after observing the decision of vendor 1, vendor 2 chooses where to locate. Use backward induc- tion to solve this game (and identify the subgame perfect Nash equilibrium). Remember that you need only to specify the second vendor (his best move conditional on every different action of vendor1 e players moving simultaneously s sequentially optimal strategy

Explanation / Answer

Answer:

A retrogressive acceptance harmony of the diversion will be a Nash Equilibrium. Presently if applicant one picks first then he will likewise get the chance to pick last as this another move amusement. In the end of the game candidate 1 will have claimed five regions and candidate 2 will have claimed four regions.

So candidate 2 will keep this in mind and apply backward induction and choose the best regions early on in the game. Candidate 2 will keep in mind that Candidate 1 will choose last and will ensure that his choices take up the best locations first. This will be his ideal technique for each activity of Candidate 1. This is a Nash Equilibrium.

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