Making the First Move: Understanding Extensive Form Games

In this lesson, Professor Yana Gallen explores extensive form games where players make decisions in a specific order. She explains the concept of backward induction, a method used to solve such games by considering the decisions of later players and working backward to inform earlier decisions. The lesson also touches on the concept of first-mover advantage, where the first player to act in a sequential game can secure better payoffs and how commitment can alter the outcome by making one player’s actions more predictable. These concepts give us insights into and strategies on how to approach many situations, like bidding on a new house, whether a company should enter a new market, and whether you should help with a group project.