Question: c) Suppose instead that the treaty is expected to be in force indefinitely into the future and that India and Pakistan receive the payoffs described

 c) Suppose instead that the treaty is expected to be in
force indefinitely into the future and that India and Pakistan receive the

c) Suppose instead that the treaty is expected to be in force indefinitely into the future and that India and Pakistan receive the payoffs described each year the treaty is in force. The two countries know that if either country defects on the agreement the other country will punish the cheater by defecting in return. Assume that both countries' discount rates are 0.9. How many periods would India have to punish Pakistan in order to make compliance worth more to Pakistan than cheating? (Show your work)

Step by Step Solution

There are 3 Steps involved in it

1 Expert Approved Answer
Step: 1 Unlock blur-text-image
Question Has Been Solved by an Expert!

Get step-by-step solutions from verified subject matter experts

Step: 2 Unlock
Step: 3 Unlock

Students Have Also Explored These Related Economics Questions!