Game Theory

Sequen&al Move Games

1
Sequen0al Moves vs Simultaneous Moves
Sequen&al Move Games: strict order of play
In reality, many games combine sequen&al- and simultaneous-move
situa&ons
We rst understand sequen&al move games, then simultaneous
move games, then combine them
Game Tree
Also called extensive form of a game
How is it dierent from a decision tree?
Nodes: Ini&al node, Decision/ Ac&on
node, Terminal node
Branches: Choices
Players & Payos = Challenger,
Incumbent
Strategies
Challenger: in, out
Incumbent: acquiesce, ght
Solving the Game by Backward Induc0on
Incumbent has the last move; what
will it choose?
Acquiesce
In the preceding play, Challenger can
gure out what Incumbent is going to
do i.e. acquiesce
Challenger can now evaluate its
choices knowing what Incumbent will
do and the resul&ng payos
What will Challenger choose?
In
A Game against Yourself!

Suppose you are deciding
whether to smoke. Todays You , Future You
Continue -1, 1
Is it a game or a decision? Future You
If you try it, you have the Try 1,- 1
further decision of whether to Not
con&nue.
Todays You
But once you try it, you become
an addict (future you)
Not
Therefore when you make your
choice today, you have to look 0
ahead and factor future you into
your current decision
What will you choose today?
The PM race game
Two poli&cians, NaMo and RaGa are poten&al PM
candidates.
NaMo has declared his candidacy. RaGa has to
decide whether or not to enter the race aWer which
NaMo decides whether or not to go on an
extensive campaign tour.
The poten&al payos, RaGas rst, are:

In-Tour {1,1}.
Out-Tour {3,3}.
In-No tour {4,2}.
Out-No tour {2,4}.

Decide whether to enter if you are RaGa.
Begin by construc&ng the game tree.
Equilibrium in the PM race game

If RaGa chooses in we see RaGa , NaMo
that NaMo will choose no Tour 1, 1
NaMo
tour and the payos will
be {4,2}. In
No tour 4, 2
If RaGa chooses out we
RaGa
see that NaMo chooses no
tour and the payos are
{2,4}.
Out Tour 3, 3
So RaGa chooses in and NaMo
NaMo chooses no tour.
No tour 2, 4
Order Advantages
The PM race game again.
Two poli&cians, NaMo and RaGa are again poten&al PM candidates. NaMo has
declared his candidature for the elec&on, but has not decided on whether to
launch any campaign tour.
This &me NaMo get the rst move and must decide whether or not to go for
campaign tour. Following this RaGa decides whether or not to enter the race.
The poten&al payos, NaMos rst, are as before:

Tour-in {1,1}.
Tour-out {3,3}.
No tour-in {2,4}.
No tour-out {4,2}.

Does the move sequence change the outcome?
Equilibrium in the new PM race game.

If NaMo chooses tour we see , RaGa
NaMo,
In 1, 1
that RaGa will choose out and RaGa
the payos will be {3,3}. Tour 3, 3
Out
If NaMo chooses no tour RaGa NaMo
chooses in and the payos are
{2,4}.
In 2, 4
No tour RaGa
So NaMo chooses tour and
RaGa stays out. Out 4, 2
Is there a rst mover advantage?
Sequen0al move games
More than 2 players.
The logic of solving sequen&al move games with more than two players is the
same as with two players.
Apply backwards induc&on..think ahead and reason back.
One technique that allows us to keep track of this process is oWen referred to as
pruning the tree.
Consider three computer rms: Dell, HP, and Gateway. Each can manufacture
either in or out of the US
Each manufacturer can benet from employing cheap foreign labor and can benet from
learning from the others experience of dealing with foreign regula&ons, unions, customs
and the like. However there is not enough skilled foreign labor for all three rms. The
following game might arise.
Equilibrium in the Sequential move game with more than 2
players.

Payoffs
US 1,5,5
Gateway
US
HP 5,5,2
Foreign

US 5,2,5
US Gateway
Foreign

Dell Foreign 3,4,4

US
Gateway 2,5,5

US
Foreign
HP Foreign 4,3,4

US 4,4,3
Gateway
Foreign

Foreign 4,4,4
 Equilibrium in the Sequential move game with more than 2
players.
To prune the tree. Payoffs
US 1,5,5
Gateway
First consider all the US
choices Gateway would not HP
Foreign
5,5,2

make and strike out these

branches. US Gateway US 5,2,5

Foreign

Dell Foreign 3,4,4

US
Gateway 2,5,5

US
Foreign
HP Foreign 4,3,4

US 4,4,3
Gateway
Foreign

Foreign 4,4,4
 Equilibrium in the Sequential move game with more than 2
players.
To prune the tree. Payoffs
1,5,5
US
Gateway
First consider all the US
choices Gateway would not HP
Foreign
5,5,2

make and strike out these

5,2,5
branches. US Gateway US

Foreign
hen prune out the
T Dell 3,4,4
Foreign
choices HP would not
make. Gateway
US
2,5,5

US
Foreign
HP Foreign 4,3,4

US 4,4,3
Gateway
Foreign

Foreign 4,4,4
 Equilibrium in the Sequential move game with more than 2
players.
To prune the tree. Payoffs
US 1,5,5
Gateway
First consider all the
US
choices Gateway would not HP
Foreign
5,5,2

make and strike out these

branches. US 5,2,5
US Gateway
Foreign

hen prune out the

T Dell Foreign 3,4,4

choices HP would not

make. Gateway
US
2,5,5

US
inally prune out the
F Foreign
HP Foreign 4,3,4

choices Dell would not US

Gateway 4,4,3
make.
Foreign

hus, Dell chooses to

T Foreign 4,4,4

locate overseas while HP

and Gateway stay in the US
Sequen0al move games
More than 2 moves
Suppose you are playing a game like chess with many moves.
In principle the game can be solved by backwards induc&on.
In prac&ce it is too complicated.
This does not mean you dont think ahead.
Think ahead a few moves and assess which situa&ons are possible.
Give a value to each of these intermediate situa&ons.
Play for highest intermediate value.
In chess this might involve crea&ng space to maneuver your pieces.
Computer programs can, in theory, work out the op&mal game play.
Next
Simultaneous Move Games with Discrete Strategies
Nash Equilibrium
Assignment (each group to submit, hand-wri5en, in the next class)
A slave has just been thrown to the lions in the Roman Colosseum. Three lions are
chained down in a line, with Lion 1 closest to the slave. Each lions chain is short enough
that he can only reach the two players immediately adjacent to him.
The game proceeds as follows. First, Lion 1 decides whether or not to eat the slave.
If Lion 1 has eaten the slave, then Lion 2 decides whether or not to eat Lion 1 (who is
then too heavy to defend himself). If Lion 1 has not eaten the slave, then Lion 2 has no
choice: he cannot try to eat Lion 1, because a ght would kill both lions.
Similarly, if Lion 2 has eaten Lion 1, then Lion 3 decides whether or not to eat Lion 2.
Each Lions preferences are fairly natural: best (4) is to eat and stay alive, next best (3) is
to stay alive but go hungry, next (2) is to eat and be eaten, and worst (1) is to go hungry
and be eaten.
Draw the game tree, with payos, for this three player game.
Iden&fy the equilibrium in this game. Describe the strategies of each player, not just
iden&fy the payos.
Is there a rst mover advantage to this game? Explain why or why not.