Use the following normal-form game to answer the questions below.

Player 2

Strategy

C

D

Player 1

A

35, 35

90, 10

B

10, 90

40, 40

a. Identify the one-shot Nash equilibrium.

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(B,D)

(A,D)

(A,C)

(B,C)

b. Suppose the players know this game will be repeated exactly three times. Can they achieve payoffs that are better than the one-shot Nash equilibrium?

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Yes

No

c. Suppose this game is infinitely repeated and the interest rate is 7 percent. Can the players achieve payoffs that are better than the one-shot Nash equilibrium?

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No

Yes

d. Suppose the players do not know exactly how many times this game will be repeated, but they do know that the probability the game will end after a given play is . If is sufficiently low, can players earn more than they could in the one-shot Nash equilibrium?

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Yes

No