<Tr> <Th> Used for </Th> <Td> Extensive form games </Td> </Tr> <Tr> <Th> Example </Th> <Td> Ultimatum game </Td> </Tr> <P> In game theory, a subgame perfect equilibrium (or subgame perfect Nash equilibrium) is a refinement of a Nash equilibrium used in dynamic games . A strategy profile is a subgame perfect equilibrium if it represents a Nash equilibrium of every subgame of the original game . Informally, this means that if the players played any smaller game that consisted of only one part of the larger game, their behavior would represent a Nash equilibrium of that smaller game . Every finite extensive game has a subgame perfect equilibrium . </P> <P> A common method for determining subgame perfect equilibria in the case of a finite game is backward induction . Here one first considers the last actions of the game and determines which actions the final mover should take in each possible circumstance to maximize his / her utility . One then supposes that the last actor will do these actions, and considers the second to last actions, again choosing those that maximize that actor's utility . This process continues until one reaches the first move of the game . The strategies which remain are the set of all subgame perfect equilibria for finite - horizon extensive games of perfect information . However, backward induction cannot be applied to games of imperfect or incomplete information because this entails cutting through non-singleton information sets . </P>

What is the difference between subgame perfect equilibrium and nash equilibrium
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