midGame Theory
What is subgame perfect equilibrium (SPE)?
Updated May 16, 2026
Short answer
Subgame Perfect Equilibrium is a refinement of Nash Equilibrium where strategies are optimal in every subgame.
Deep explanation
SPE eliminates non-credible threats by requiring that players' strategies form a Nash Equilibrium in every subgame of the original game. It is especially important in sequential games where earlier moves influence later outcomes. It is typically solved using backward induction.
Real-world example
Used in contract negotiations where future commitments must remain credible.
Common mistakes
- Confusing Nash equilibrium with subgame perfection.
Follow-up questions
- Why is SPE stronger than Nash equilibrium?
- How is SPE computed?