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. 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

The minimum bonus should be the cost of high effort.

Answered: What is the minimum bonus that will…

What is the minimum bonus that will entice high effort? O 1.40,000 O 2. 260,000 O 3. 300,000 O 4. 400,000 O 5. 520,000 O 6. 60,000 O 7.100,000

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

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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

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