... study in normal form games. There are two ways to use the added information to eliminate strategies that would not be chosen by a rational agent: backward induction and forward induction. The latter is relatively exotic (although more defensible). Backward induction, by far the most popular technique...

.... The theory of real option value has the objective to adjust the standard cost-benefit methodology, which is static by nature, in order to integrate these dynamic aspects of the evaluation problem. The computation of option values must be done by backward induction. At each node of the decision tree...