Question: Suppose there are two players (Player 1 and Player 2) who play a repeated (indefinite length) game together. Player 2 currently has a choice to

Suppose there are two players (Player 1 and Player 2) who play a repeated (indefinite length) game together. Player 2 currently has a choice to make:

i) cooperate and receive payoff of 5 indefinitely in all subsequent rounds

ii) cheat in period 1 and receive 20, but payoffs fall to 1 in all future periods

What is the necessary discount factor (delta) to sustain cooperation? (round to the nearest two decimals)

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