Consider two drivers A and B; who come across on a road where there is no traffic jam, and only one car can pass at a time. Now, if they both stop each get a payoff 0, if one continues and the other stops, then the one which stops get 0 and the one which continues get 1. If both of them continue then they crash each other and each gets a payoff −1.
Suppose driver A is the leader, that is A moves first and then observing A’s action B takes an action.
a) Formulate this situation as an extensive form game.
b) Find the all Nash equilibria of this game.
c) Is there any dominant strategy of this game?
d) Find the Subgame Perfect Nash equilibria of this game.