1. Briefly elaborate what is meant by a sub-game and illustrate in the case of centipede game.
2. Illustrate in detail how the unique subgame perfect nash equiibrium is obtained via the method of Backward Induction. Points to address includes
- what is a Nash Equilibrium
- How backward induction leads to a Sub-Game Nash Equilibrium at every sub-game / node.
Illustrate this clearly.
-How this method ultimately leads to the unique sub-game Nash Equilibrium ; i.e. player 1 defaulting at node 1 ( beginning of the game).