Multistage Games

This chapter discusses sequential games, i.e. games in which the players make their decisions one after the other and observably from each other. This requires backward induction as a different solution method and the subgame perfect Nash equilibrium as a refinement of the solution concept that explicitly considers that a consistent and rational decision is made in each stage of the game (subgame). In this context, it is also discussed how the sequence of moves can lead to different advantages for the players. Players may thus have an incentive to influence the outcome of the game to their advantage—but this is often only possible if they can credibly commit themselves and empty threats are excluded. The analysis concludes with a consideration of sequential games in continuous strategies.