Economic and Game Theory
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position to observe Player 1ís choice between U, M and D
My answer was that although player 2 wouldn't know what 1 would play, he would prepare a best response to whatever 1 would play, i.e. u if U, u if M, d if D. 1 knows that 2 doesn't know what 1 will play but 1 knows that 2 would best respond to him. Thus, his dominant strategy would be to play M so that he can yield payoff = 9.
Therefore, the NE would be (M,u), an answer that is same as the SPNE outcome in Q3c.
Would this be correct?
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