ABSTRACT
In the games we investigate, the use of backward induction and/or the elimination of dominated strategies leads to a unique Nash prediction, but there are clear benefits to the players if, for some reason, some players fail to behave in this fashion. Thus, we have intentionally chosen an environment in which we expect Nash equilibrium to perform at its worst. The best known example of a game in this class is the finitely repeated prisoners’ dilemma. We focus on an even simpler and, we believe more compelling, example of such a game, the closely related alternating-move game that has come to be known as the “centipede game” (see Binmore (1987)).
