Suppose the stage game was played an infinite amount of times, and let x = 13: P2 C D E 5,5 0,13 0,0 13,0 3,3 0,0 0,0 0,0 1,1 C P1 D E Now consider the following strategy: • In the first round, play C In all future rounds: If both players played C in all previous rounds, play C. - Otherwise, play E. Let the discount factor for both players be 8 € (0,1). What is the lowest value of such that both players using this strategy can be a SPNE? (a) This strategy profile is a SPNE for any & € (0,1) 9 (b) 8 > 2/3 13 (c) 8> ²/ 1 (d) 8 > }/ 3 (e) This strategy profile cannot be a SPNE for any 8 € (0, 1)

ENGR.ECONOMIC ANALYSIS
14th Edition
ISBN:9780190931919
Author:NEWNAN
Publisher:NEWNAN
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
icon
Related questions
Question

* Please be advised this is for practice preperation only ** i just really need help on this - I dont undertsand 

Suppose the stage game was played an infinite amount of times, and let x = 13:
P2
C
D
E
5,5 0,13 0,0
13,0
3,3
0,0
0,0 0,0 1,1
C
P1 D
E
Now consider the following strategy:
• In the first round, play C
In all future rounds:
If both players played C in all previous rounds, play C.
- Otherwise, play E.
Let the discount factor for both players be 8 € (0,1). What is the lowest value of
such that both players using this strategy can be a SPNE?
(a) This strategy profile is a SPNE for any & € (0,1)
9
(b) 8 > 2/3
13
(c) 8> ²/
1
(d) 8 > }/
3
(e) This strategy profile cannot be a SPNE for any 8 € (0, 1)
Transcribed Image Text:Suppose the stage game was played an infinite amount of times, and let x = 13: P2 C D E 5,5 0,13 0,0 13,0 3,3 0,0 0,0 0,0 1,1 C P1 D E Now consider the following strategy: • In the first round, play C In all future rounds: If both players played C in all previous rounds, play C. - Otherwise, play E. Let the discount factor for both players be 8 € (0,1). What is the lowest value of such that both players using this strategy can be a SPNE? (a) This strategy profile is a SPNE for any & € (0,1) 9 (b) 8 > 2/3 13 (c) 8> ²/ 1 (d) 8 > }/ 3 (e) This strategy profile cannot be a SPNE for any 8 € (0, 1)
Expert Solution
steps

Step by step

Solved in 1 steps with 1 images

Blurred answer
Similar questions
Recommended textbooks for you
ENGR.ECONOMIC ANALYSIS
ENGR.ECONOMIC ANALYSIS
Economics
ISBN:
9780190931919
Author:
NEWNAN
Publisher:
Oxford University Press
Principles of Economics (12th Edition)
Principles of Economics (12th Edition)
Economics
ISBN:
9780134078779
Author:
Karl E. Case, Ray C. Fair, Sharon E. Oster
Publisher:
PEARSON
Engineering Economy (17th Edition)
Engineering Economy (17th Edition)
Economics
ISBN:
9780134870069
Author:
William G. Sullivan, Elin M. Wicks, C. Patrick Koelling
Publisher:
PEARSON
Principles of Economics (MindTap Course List)
Principles of Economics (MindTap Course List)
Economics
ISBN:
9781305585126
Author:
N. Gregory Mankiw
Publisher:
Cengage Learning
Managerial Economics: A Problem Solving Approach
Managerial Economics: A Problem Solving Approach
Economics
ISBN:
9781337106665
Author:
Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike Shor
Publisher:
Cengage Learning
Managerial Economics & Business Strategy (Mcgraw-…
Managerial Economics & Business Strategy (Mcgraw-…
Economics
ISBN:
9781259290619
Author:
Michael Baye, Jeff Prince
Publisher:
McGraw-Hill Education