10) Consider a repeated game in which the following one-shot game between two players is repeated "infinitely." Denote by "d" the discount factor. (Assume both players have the same discount factor.) Player 2 CooperateDefectPlayer 1Cooperate5, 40, 5Defect6, 01, 1 The two players try to support cooperation by using "grim trigger strategy" as discussed in class. Answer YES or NO to each of the following three questions. (a) Can they support cooperation if the common discount factor, d, is equal to 0.23? (b) Can they support cooperation if the common discount factor, d, is equal to 0.4? (c) Can they support cooperation if the common discount factor, d, is equal to 0.15? QUESTION 8Manager CEffort LevelChance ofCost ofeffortsuccessHigh Effort0.9100,000RoutineEffort0.560,000What is the minimum bonus that will entice high effort?O 1. 40,0002. 260,0003. 300,0004. 400,0005. 520,000O 6. 60,000O 7. 100,0008.0 QUESTION 9Consider a repeated game in which the following one-shot game between two players is repeated "infinitely." Denote by "d" the discount factor.Player 2CooperateDefectCooperate4, 40,6Player 1Defect6,01, 1The two players try to support cooperation by using "grim trigger strategy" as discussed in class. Answer the following questions:(a) Write down the simplified version of the present value of the payoff stream if the players decide to cooperate at some given period.(b) Write down the simplified version of the present value of the payoff stream if the players decide to defect at that same period.(c) What is the precise condition on the discount factor, d, that would support cooperation by these two players using grim trigger strategy.

We are going to use game theory concepts infinitely repeated complete information games.

Answered: 10) Consider a repeated game in which…

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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10) Consider a repeated game in which the following one-shot game between two players is repeated "infinitely." Denote by "d" the discount factor. (Assume both players have the same discount factor.)

		Player 2
		Cooperate	Defect
Player 1	Cooperate	5, 4	0, 5
Defect	6, 0	1, 1

The two players try to support cooperation by using "grim trigger strategy" as discussed in class. Answer YES or NO to each of the following three questions.

(a) Can they support cooperation if the common discount factor, d, is equal to 0.23?

(b) Can they support cooperation if the common discount factor, d, is equal to 0.4?

QUESTION 8
Manager C
Effort Level
Chance of
Cost of
effort
success
High Effort
0.9
100,000
Routine
Effort
0.5
60,000
What is the minimum bonus that will entice high effort?
O 1. 40,000
2. 260,000
3. 300,000
4. 400,000
5. 520,000
O 6. 60,000
O 7. 100,000
8.0

QUESTION 9
Consider a repeated game in which the following one-shot game between two players is repeated "infinitely." Denote by "d" the discount factor.
Player 2
Cooperate
Defect
Cooperate
4, 4
0,6
Player 1
Defect
6,0
1, 1
The two players try to support cooperation by using "grim trigger strategy" as discussed in class. Answer the following questions:
(a) Write down the simplified version of the present value of the payoff stream if the players decide to cooperate at some given period.
(b) Write down the simplified version of the present value of the payoff stream if the players decide to defect at that same period.
(c) What is the precise condition on the discount factor, d, that would support cooperation by these two players using grim trigger strategy.

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