In a non-cooperative game involving two players, both players must decide on their strategies while considering the outcomes. If they both aim for a Pareto efficient outcome but face incentives that lead them to deviate from cooperation, which of the following strategies would likely emerge when applying backward induction?

In a non-cooperative game, players make decisions based on their own interests while considering what the other player might do. If both players want to reach a Pareto efficient outcome, they would ideally cooperate to maximize benefits for both. However, if there are incentives that encourage them to act in their own self-interest, they might not stick to cooperation. Using backward induction, where players think through the possible outcomes starting from the end of the game, they may choose strategies that lead to less optimal results, like competing rather than cooperating. For example, if two businesses decide on pricing, they might both lower their prices to attract customers, leading to a situation where neither earns a good profit, rather than agreeing on higher prices that benefit them both.