General
- similar to Backpropagation in Machine Learning
- solve from the “deepest” subgame to the “shallowest” subgame
- as long as there is no indifference i.e. a player can chose either way and have equal payoffs, there is always exactly 1 subgame perfect strategy
- if there is just 1 Nash Equilibrium, it must be subgame perfect
- if there is just 1 subgame i.e. the game itself, the Nash Equilibrium is subgame perfect
- always applicable
- eliminates Non-Credible Threats
- only in 1-shot game
- reputation can bring the empty threats back into perspective
- in simultaneous games all Nash Equilibrium are subgame perfect
Process Repeated Games
- start at last decision
- treat as one-shot game and solve for Nash Equilibrium
- take a look at next last decision
- taking the nash of the previous game into account, what is the nash now?
- repeat until you found a loop
- mostly will be right away with second to last decision