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Medium · Game Theory & Logic · Quant Trader interview question · game-theory, backward-induction, behavioral-economics
Two players, Alice and Bob, are playing a centipede game. The game has 4 rounds. At each round, a player can either 'cooperate' or 'defect'. Initially, both players have 1 dollar. If a player defects, that player gets 3 dollars and the other player gets 0 dollars, ending the game. If a player cooperates, both players' payoffs are updated as follows: The current player's payoff increases by 1 dollar, and the other player's payoff increases by 3 dollars. Then the game advances to the next