Question

Check all statements that make this a true sentence.

In the context of a Nash equilibrium of an extensive form game, an "incredible threat" is a strategy that involves:

Select one or more:

a. choosing a suboptimal action at a node that is never reached in the equilibrium.

b. a choice at some node that is not part of the subgame perfect equilibrium.

c. a threat so unfathomably severe that no player would ever make it.

d. a threat that is ignored in the Nash equilibrium because it is incredible.

Answer 1

In the context of a Nash equilibrium of an extensive form game, an "incredible threat" is a strategy that involves:a threat that is ignored in the Nash equilibrium because it is incredible. and a choice at some node that is not part of the subgame perfect equilibrium.

Mainly an incredible threats refers to a threat in sequential that a rational player will never carry out as it is not on his best interest to do so , thus through backward induction those incredible threats can be eliminated and the left equilibria are known as subgame perfect nash equilibrium , thus while having a nash equilibrium or extensive form game through backward induction we eliminate those incredible threats as they are incredible.