Player 1 and Player 2 are playing a game in which Player 1 has the first move at A in the decision tree shown below. Once Player 1 has chosen either Up or Down, Player 2, who can see what Player 1 has chosen, must choose Up or Down at B or C. Both players know the payoffs at the end of each branch. What is the equilibrium outcome of this game?

A. Player 1 chooses Down and Player 2 chooses Up.
B. Player 1 and Player 2 both choose Down.
C. Player 1 chooses Up and Player 2 chooses Down.
D. Player 1 and Player 2 both choose Up.


Answer: C

Economics

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