You have to decide whether to invest $100 in a friend's enterprise, where in a year's...

  

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You have to decide whether to invest $100 in a friend's enterprise, where in a year's time the money will increase to $130 You have agreed that your friend will then repay you $120, keeping $10 for himself. But instead he may choose to run away with the whole $130. Any of your money that you don't invest in the enterprise you car invest elsewhere safely at the prevailing rate of interest r and get $100(1+r) next year. For interest rate r %, there is an equilibrium outcome of the infinitely repeated game, in which each period you invest with your friend and he repays as agreed. Hint: Round the number to 2 decimal places. For example, if you find r 8.32432. type in 8.32. If the rate of interest is 10% per year, an alternative profit-splitting agreement giving S for the friend is an equilibrium outcome of the infinitely repeated game, where each period you invest with your friend and he repays as agreed. Hint: Write the smallest integer that supports the equilibrium. 4 You have to decide whether to invest $100 in a friend's enterprise, where in a year's time the money will increase to $130 You have agreed that your friend will then repay you $120, keeping $10 for himself. But instead he may choose to run away with the whole $130. Any of your money that you don't invest in the enterprise you car invest elsewhere safely at the prevailing rate of interest r and get $100(1+r) next year. For interest rate r %, there is an equilibrium outcome of the infinitely repeated game, in which each period you invest with your friend and he repays as agreed. Hint: Round the number to 2 decimal places. For example, if you find r 8.32432. type in 8.32. If the rate of interest is 10% per year, an alternative profit-splitting agreement giving S for the friend is an equilibrium outcome of the infinitely repeated game, where each period you invest with your friend and he repays as agreed. Hint: Write the smallest integer that supports the equilibrium. 4

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