In a game where Player A moves first and Player B observes that move before making their own decision, which of the following scenarios best illustrates the concept of backward induction?

Backward induction is a method where a player thinks ahead about what the next player will do and then chooses their own move accordingly. In the described game, Player A knows that Player B will see his move and then act optimally, so A chooses a move that maximizes his payoff given B’s best response. Player B, observing A’s move, immediately picks the action that gives him the highest payoff for that particular move of A. For example, if A can choose “attack” or “pass” and B will attack if A passes but will defend if A attacks, A will choose the action that gives him the best outcome after anticipating B’s reaction. This sequential reasoning, where each player anticipates the next player’s optimal reply, is exactly what backward induction captures.