The statement that is true for the backward induction method in sequential games is:
- It assumes that players are perfectly rational.
Explanation:
1. Backward induction is a method used in game theory to analyze and solve sequential games where players take turns to make decisions.
2. In this method, players are assumed to be perfectly rational, meaning that they make decisions by maximizing their payoffs based on complete and accurate information.
3. By working backward from the end of the game to the beginning, players determine the optimal strategies at each decision point, considering the future actions and reactions of other players.
4. This assumption of perfect rationality allows players to anticipate the choices and outcomes of others, leading to a solution that predicts how the game will unfold.
Therefore, the correct statement is that the backward induction method in sequential games assumes that players are perfectly rational.
