Two investors have each deposited D with a bank. The bank has invested these deposits in...

 

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Two investors have each deposited D with a bank. The bank has invested these deposits in a long-term project. If the bank is forced to liquidate its investment before the project matures, a total of 2r can be recovered, where D >r> D/2. If the bank allows the investment to reach maturity, however, the project will pay out a total of 2R, where R> D. There are two dates at which the investor can make withdrawals from the bank: date 1 is before the bank's investment matures; date 2 is after. Assume that there is no discounting. If both investors make withdrawals at date 1, each receives r and the game ends. If only one investor makes a withdrawal at date 1, then that investor receives D. the other receives 2r- D and the game ends. Finally, if neither investor makes a withdrawal at date 1, then the project matures and the game moves to date 2. If both investors make withdrawals at date 2, each receives R and the game ends. If only one investor makes a withdrawal at date 2, then that investor receives 2R-D, the other receives D and the game ends. Finally, if neither investor makes a withdrawal at date 2, then the bank returns R to each investor and the game ends. Find all subgame perfect Nash equilibria, and their outcomes. Two investors have each deposited D with a bank. The bank has invested these deposits in a long-term project. If the bank is forced to liquidate its investment before the project matures, a total of 2r can be recovered, where D >r> D/2. If the bank allows the investment to reach maturity, however, the project will pay out a total of 2R, where R> D. There are two dates at which the investor can make withdrawals from the bank: date 1 is before the bank's investment matures; date 2 is after. Assume that there is no discounting. If both investors make withdrawals at date 1, each receives r and the game ends. If only one investor makes a withdrawal at date 1, then that investor receives D. the other receives 2r- D and the game ends. Finally, if neither investor makes a withdrawal at date 1, then the project matures and the game moves to date 2. If both investors make withdrawals at date 2, each receives R and the game ends. If only one investor makes a withdrawal at date 2, then that investor receives 2R-D, the other receives D and the game ends. Finally, if neither investor makes a withdrawal at date 2, then the bank returns R to each investor and the game ends. Find all subgame perfect Nash equilibria, and their outcomes.

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here are the subgame perfect Nash equilibria in this investment game and their outcomes Subgame 1 Bo... View the full answer