ENGR.ECONOMIC ANALYSIS
ENGR.ECONOMIC ANALYSIS
14th Edition
ISBN: 9780190931919
Author: NEWNAN
Publisher: Oxford University Press
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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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Transcribed Image Text: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.
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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Transcribed Image Text: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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