Chapter 3
GAMES WITH SEQUENTIAL MOVES
Games with Sequential Moves
➢Players take turns making their moves,
➢They know what the players who have gone before them have done.
➢Each player must consider how her opponent will respond if she makes a particular move.
Game Trees
➢Game trees: graphical technique for displaying and analyzing sequential-move
games.
➢This tree is referred to as the extensive form of a game.
➢It shows all the component parts of the game; players, actions, and payoffs.
➢ Initial node, action node or decision node
➢ Branches: the possible actions that can be taken from any
decision node.
➢ Player Nature to introduce external uncertainty in a game
➢ Last node called terminal node
➢ The outcome of a particular sequence of actions (payoffs)
➢ Expected payoff when Nature make a decision (ANN payoff)
➢ Move vs strategy (a complete plan of actions)
➢ There must be at least one branch leading from each
decision node, but there is no maximum.
➢ Every decision node can have only one branch leading to it.
Carmen smoking game
We now want to use trees to solve the games.
Carmen smoking game:
➢First, she has to decide whether to try smoking at all.
➢If she does try it, she has the further decision of whether to continue.
Carmen smoking game (continued)
In the previous slide, the problem of addiction is ignored.
When Today’s Carmen makes her decision, she has to play against Future Carmen.
Carmen smoking game (continued)
Working backward along the tree to solve the whole game.
➢This method of looking ahead and reasoning back to determine behavior in sequential-move games is
known as rollback. the method is also called backward induction.
➢the outcome that arises from playing these strategies is the rollback equilibrium outcome.
A more complex game with more players (A flower garden)
➢The three players, Emily, Nina, and Talia, all live on the same small street.
➢Each has been asked to contribute toward the creation of a flower garden. (We need at least 2 contributions to have a pleasant
garden. Each player regards a pleasant garden more highly than her own contribution. )
➢From each player’s perspective, there are four distinguishable outcomes:
1. She does not contribute, but both of the others do (resulting in a pleasant garden and saving the cost of her own contribution). (payoff 4)
2. She contributes, and one or both of the others do as well (resulting in a pleasant garden, but incurring the cost of her own contribution).
(payoff 3)
3. She does not contribute, and only one or neither of the others does (resulting in a sparse garden, but saving the cost of her own
contribution). (payoff 2)
4. She contributes, but neither of the others does (resulting in a sparse garden and incurring the cost of her own contribution). (payoff 1)
➢ The players move sequentially.
A more complex game (A flower garden)
Players strategies
Recall that a strategy is a complete plan of action.
• Emily moves first and has just two choices. so her strategy is quite simple and is effectively the same thing as her move. Emily has two
choices and two strategies. (C(Contribute) and D (Don’t) )
• Nina’s complete plan of action has to specify what she would do for each choice of Emily. (“C if Emily chooses C so that the game is at
node b, D if Emily chooses D so that the game is at node c,” or, more simply, “C at b, D at c,” or even “CD”)
• Nina has two choices available at each of the two nodes where she might be acting, she has available to her four plans, or strategies—“C
at b, C at c,” “C at b, D at c,” “D at b, C at c,” and “D at b, D at c,” or “CC,” “CD,” “DC,” and “DD.”
• Talia can decide in 8 nodes, In each she has 2 options leading to 16 strategies. (CCCC, CCCD, CCDC, CCDD, CDCC, CDCD, CDDC, CDDD, DCCC,
DCCD, DCDC, DCDD, DDCC, DDCD, DDDC, DDDD.)
• The configuration of strategies, D for Emily, DC for Nina, and DCCD for Talia, then constitutes the rollback equilibrium of the game.
Three concepts to solve the game
1. The lists of available strategies for each player.
2. The optimal strategy, or the optimal complete plan of action for each player. This strategy
must specify the player’s best choices at each node where the rules of the game specify that
she moves, even though many of these nodes will never be reached in the actual path of play.
3. The actual path of play in the rollback equilibrium, found by putting together the optimal
strategies for all the players.
Order advantages
First-mover advantage vs Second-mover advantage.
➢In the rollback equilibrium of the street–garden game, who took the advantage of her turn?
➢Can you think of any game with Second-mover advantage?
A more complex game with more moves (Tic-Tac-Toe)
➢Consider a very simple version in which
two players (X and O) each try to be the
first to get two of their symbols to fill any
row, column, or diagonal of a two-by-two
game board.
➢Can you imagine the game tree of chess?
Do evidence support rollback equilibrium?
Not necessarily!!!
▪Two players are chosen and designated as A and B.
▪The experimenter puts a dime on the table. Player A can take it or pass.
▪If A takes the dime, the game is over, with A getting the 10 cents and B getting nothing.
▪If A passes, the experimenter adds a dime, and now B has the choice of taking the 20 cents or passing.
▪the pile of money grows until reaching some limit.
What is the rollback eq.?
In experiments, such games typically go on for at least a few rounds.
Do evidence support rollback equilibrium?
Not necessarily!!!
▪The apparent violations of strategic logic can often be explained by recognizing that people do not
care merely about their own money payoffs; rather, they internalize concepts such as fairness.
▪People do fail to look ahead far enough, and they do fail to draw the appropriate conclusions from
attempts to look ahead. For example,
▪Therefore the game-theoretic analysis of rollback and rollback equilibria serves an advisory or
prescriptive role as much as it does a descriptive role.
