Suppose that 2 players play the following simultaneous-move game infinitely, but discount future payoffs at a...

Transcribed Image Text:

Suppose that 2 players play the following simultaneous-move game infinitely, but discount future payoffs at a discount rate d. P₁ A 20, 20 A D 8,0 Consider the following Grim Trigger strategy: If D has never been played before, play A . Otherwise, play D P₂ D 0,32 4,4 (a) Write down at least four terms from the series of payoffs that the each player receives when both players are playing the grim trigger strategy. Then, write down what the infinite series of payoffs is equal to as a function of the discount rate. (b) Suppose that player 1 deviates by playing D in period 0, and thereafter reverts to playing the trigger strategy. Write down at least four terms from the series of payoffs player 1 receives from doing this. Then, write down what the infinite series of payoffs is equal to as a function of the discount rate. Suppose that 2 players play the following simultaneous-move game infinitely, but discount future payoffs at a discount rate d. P₁ A 20, 20 A D 8,0 Consider the following Grim Trigger strategy: If D has never been played before, play A . Otherwise, play D P₂ D 0,32 4,4 (a) Write down at least four terms from the series of payoffs that the each player receives when both players are playing the grim trigger strategy. Then, write down what the infinite series of payoffs is equal to as a function of the discount rate. (b) Suppose that player 1 deviates by playing D in period 0, and thereafter reverts to playing the trigger strategy. Write down at least four terms from the series of payoffs player 1 receives from doing this. Then, write down what the infinite series of payoffs is equal to as a function of the discount rate.

Answer rating: 100% (QA)

Answers and Explanation a Four terms in the series ... View the full answer