The Dynamic Games is quite different to the basic Static Games because it is about time . People make decisions again and again
Under the Dynamic Games topic, we can then talk about the Sequential game, Backward Reasoning, Subgame Perfect Nash Equilibrium (SPNE)
The difference now is that the player moves sequentially, these games are referred to as extensive-form games.
- Decision Nodes: A point at which player makes a decision.
- The terminal nodes refers to the end point of the game, it is also called the “Outcome”
- Branch: A line connecting two nodes.
Example: The Stackelberg is a sequential version of Cournot, it concludes leader (firm 1) and follower (firm 2)
There is a key concept for us to understand the Dynamic Games, which is Information Set