1. Backward Induction – Looking forward to the final decision node(s) and reasoning backwards
2. Equilibrium Strategy (of a firm given sequential strategic interaction) – a sequence of a firm’s best actions, where the actions are taken at the corresponding nodes
This theory in a basic sense is saying that if you have a particular outcome that you want to related to a current state, reasoning backwards would be the best way to create the best link between point A and point B.
Terms and definitions credited to ‘Marginal Economics and Organizational Architecture’ textbook by Brickley, Smith, and Zimmerman
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