Question: Please show all work! Question 3 (30 points): Consider the following Prisoners' Dilemma D D 0,0 8,-2 C -2,8 4,4 Suppose the above stage game

Please show all work! Question 3 (30 points): Please show all work!

Question 3 (30 points): Consider the following Prisoners' Dilemma D D 0,0 8,-2 C -2,8 4,4 Suppose the above stage game is played infinitely. Each player has a discount factor (0,1). A) (10 points) Consider the following strategy. Strategy A: Play C in the first period. Then, Choose C after any history in which the last period outcome was (C,C). Choose D after any other history, that is, if the last period outcome was not (C,C). Consider now any history in which the outcome in the last period is (C,C). Under what conditions on 8 E (0,1), if any, does Strategy A constitute a subgame perfect equilibrium? You need to check the one-shot deviation property when the last period outcome is (C,C). D D 0,0 8,-2 C -2,8 4,4

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