Set out by John von Neumann and Oskar Morgenstern (Theory of Games and Economic Behavior, 1944), proved for every finite game of this kind by Harold W. Kuhn (1953), and refined by Reinhard Selten (1965).
Solves a sequence of moves by starting at the final choices and working back, picking each player's best move, to find the path rational players will take.
When to reach for it
When a negotiation, deal, or competitive exchange runs in turns toward a known end, and each side's later moves should shape the first one.
How it runs
- Draw the sequence of moves as a tree.
- Record each player's payoff at every end point.
- At the last decision, pick the mover's best option.
- Step back one decision and repeat.
- Continue to the first move; that path is the prediction.
Where it sits in SOLVE eX
Go to the source
- Theory of Games and Economic Behavior, section 15, 1944
- Extensive Games and the Problem of Information, Contributions to the Theory of Games II, 1953
- Spieltheoretische Behandlung eines Oligopolmodells mit Nachfrageträgheit, Zeitschrift für die gesamte Staatswissenschaft, 1965