Question: Game theory Question (15 marks) Consider the following simultaneous-move game. Max Passive Fight Charles Negotiate 6, 7 0, 9 Attack 2, 5 10, 3 1)

Game theory

Question (15 marks) Consider the following simultaneous-move game. Max Passive Fight Charles Negotiate 6, 7 0, 9 Attack 2, 5 10, 3 1) Find and draw the players' best response functions and show the Nash equilibrium on a diagram. Answer with a brief explanation.(3.5 marks) ii) Suppose the simultaneous-move game above is changed to a sequential- move game where Charles plays first and Max plays after observing Charles's move. Find Subgame Perfect Equilibrium and Nash Equilibrium of the game. Answer with a brief explanation. (4.5 marks) iii) Let the simultaneous-move game above be played repeatedly for an infinite number of times. Assume that Charles's and Max's discount values per time period are 0.9 and 0.8 respectively. Can Charles and Max cooperate on (Negotiate, Passive)? Explain in details. (7 marks)

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