AP MicroeconomicsGame Theory & Information
Backward Induction
Backward induction solves a sequential game by reasoning from the last decision backward, choosing each player's best move at every stage.
In a game tree with perfect information, you start at the final decisions, pick the optimal action there, then fold those payoffs back to earlier nodes and repeat to the start. The resulting strategy profile is the subgame-perfect equilibrium because it is optimal in every subgame, ruling out non-credible threats. It is the standard method for solving sequential/Stackelberg-type games.