Subgame Perfect Equilibrium

A Subgame Perfect Equilibrium (SPNE) is a strategic solution concept in game theory that predicts how rational players will act in every part of a complex game. It ensures that players' strategies are optimal not just overall, but at every stage and possible situation within the game. Think of it as a detailed plan that remains consistent and credible, even when looking at smaller segments of the game. SPNE helps identify stable outcomes where no player has an incentive to deviate at any point, providing a clear blueprint for rational decision-making throughout the entire process.