Tuesday

Centipede Game (Game Theory) Rosenthal 1981

Centipede Game Important Facts:
• Is an extensive form game in the field of mathematical game theory.
• This game was first introduced by Rosenthal (1981).
• Two players take turns choosing either to take a slightly larger share of a slowly increasing pot, or to pass the pot to the other player.
• Payoffs are arranged so that if one passes the pot to one's opponent and the opponent takes the pot on the next round, one receives slightly less than if one had taken the pot on the previous round.
• The traditional centipede game had a limit of 100 rounds (this is how the centipede name came about).
• The Nash equilibrium indicates that the first player take the pot on the very first round of the game.
• In real world testing relatively few players will take the pot on the first round.
• The Centipede game is commonly used in teaching to introduce the concept of backward induction and the iterated elimination of dominated strategies.
Centipede Game Significance
• Self-interest or distrust can interfere with cooperation to create a game situation where both players may do worse than if they had blindly cooperated.