The street–garden game analyzed in Section 4 of this chapter has a 16-by-4-by-2 game table when the sequential-move version of the game is expressed in strategic form, as in. There are many Nash equilibria to be found in this table.
(a) Use best-response analysis to find all of the Nash equilibria in the in.
(b) Identify the subgame-perfect equilibrium from among your set of all Nash equilibria. Other equilibrium outcomes look identical to the subgame-perfect one—they entail the same payoffs for each of the three players—but they arise after different combinations of strategies. Explain how this can happen. Describe the credibility problems that arise in the non subgame-perfect equilibria.
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