Subgame Perfect Nash Equilibrium
A generalization of backward induction is subgame perfection. Backward induction assumes that all future play will be rational. In subgame perfect equilibria, play in every subgame is rational (specifically a Nash equilibrium). Backward induction can only be used in terminating (finite) games of definite length and cannot be applied to games with imperfect information. In these cases, subgame perfection can be used. The eliminated Nash equilibrium described above is subgame imperfect because it is not a Nash equilibrium of the subgame that starts at the node reached once the entrant has entered.
Read more about this topic: Solution Concept
Famous quotes containing the words perfect, nash and/or equilibrium:
“It had been a wonderful evening. And what I needed now to give it the perfect ending was a bit of the old Ludwig Van.”
—Stanley Kubrick (b. 1928)
“One thing that literature would be greatly the better for
Would be a more restricted employment by authors of simile and
metaphor.”
—Ogden Nash (1902–1971)
“When a person hasn’t in him that which is higher and stronger than all external influences, it is enough for him to catch a good cold in order to lose his equilibrium and begin to see an owl in every bird, to hear a dog’s bark in every sound.”
—Anton Pavlovich Chekhov (1860–1904)