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)
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)
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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