Static Game:Dynamic Game:USUSA/FijiNo-TaxTaxTaxNo TaxTax(10000, -99989) (10100,-89990)(9900,-9989)(10000,10)FijiFijiNo-TaxTaxNo TaxTaxNo Tax10,000,109900,-998910,100,-89,990Sub-game_110,000,-99,989Sub-game_2Sub-game_31. What is the subgame perfect Nash equilibrium of the dynamic game? How does itdiffer from the equilibrium of the static game?

USA/Fiji No-tax (Eliminated due to being dominated by the 'Tax') Tax No-tax 10000, -99989 10100,…

Answered: (10100,-89990)

Business

Economics

(10100,-89990)

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Question

Static Game:
Dynamic Game:
US
USA/Fiji
No-Tax
Tax
Tax
No Tax
Tax
(10000, -99989) (10100,-89990)
(9900,-9989)
(10000,10)
Fiji
Fiji
No-Tax
Tax
No Tax
Tax
No Tax
10,000,10
9900,-9989
10,100,-89,990
Sub-game_1
10,000,-99,989
Sub-game_2
Sub-game_3
1. What is the subgame perfect Nash equilibrium of the dynamic game? How does it
differ from the equilibrium of the static game?

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