Game Theory 101: Backwards Induction

In the previous post of this series, we discussed the Nash Equilibrium in a game which can be derived by analysing the best responses of each player, and how that can help us to decide the best strategy (pure or mixed) to play.

This particular post focuses on a particular technique called "Backwards Induction", which can be helpful for us to reason about the optimal decision to take in certain kinds of games.

Backwards Induction

One particular way that I like to understand backwards induction is the concept of foresight; if you had knowledge of what will happen in the future beforehand, this knowledge can assist in making a decision at the present.