Question

A problem with many games is that they can have multiple Nash equilibria. This makes it difficult to predict the outcome of the game. As an illustration of a non- cooperative game with multiple equilibria, consider the following payoff table. The first number in each payoff pair is the payoff to country 2:

.:.

Required
a. Identify three Nash equilibria of this game.
b. Suppose that this game will be repeated a known, finite number of times. Suppose that the current equilibrium is in the lower left portion of the table. Describe an action by country 1 that would cause a shift to a new equilibrium.
c. Suppose that the game will be repeated an indefinite (i. e., infinite) number of times. What equilibrium would you then predict? Explain.



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  • CreatedSeptember 09, 2014
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