Ives LeFancy and Donna Gabbana are two top fashion designers who own stores on Trendy St. Each has to decide whether to present their ‘ready-to-wear’ collection at the Los Angeles Fashion Week (L.A.) or at the New York Fashion Week (N. Y.) (they can only present at one of them). If Ives chooses L.A. and Donna chooses N.Y., then Ives’ (estimated) profits are $160,000 and Donna’s are $125,000. If both choose to present in L.A., then Ives’ (estimated) profits are $45,000 and Donna’s are $30,000. If both choose to present in N.Y., then Ives’ (estimated) profits are $55,000 and Donna’s are $70,000. And if Ives chooses N.Y. and Donna chooses L.A., then Ives’ (estimated) profits are $95,000 and Donna’s are $110,000. If the interaction is sequential and Ives makes his choice first while Donna makes her decision after observing Ives' choice, then, using backward induction, we find that
Ives chooses L.A. and Donna chooses N.Y.
Ives chooses L.A. and Donna chooses L.A.
Ives chooses N.Y. and Donna chooses L.A.
Ives chooses N.Y. and Donna chooses N.Y