Assume that you had found correlation of the residuals across observations.This may happen because the regressor is ordered by size.Your regression model could therefore be specified as follows:
Yi = β0 + β1Xi + ui
ui = ρui-1 + vi; 
< 1.
Furthermore,assume that you had obtained consistent estimates for β0,β1,ρ.If asked to make a prediction for Y,given a value of X(= Xj)and 
j-1,how would you proceed? Would you use the information on the lagged residual at all? Why or why not?
Definitions:
Negative-Sum Game
A situation in which the total losses incurred by the participants are greater than the total gains.
Strategic Game
A situation or model in game theory in which players make decisions by strategically considering the choices and payoffs of other players.
Extensive Form
A representation of a game in game theory, illustrating the various choices available to players and the outcomes resulting from these choices in a tree-like structure.
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