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Question 5 Consider the following game in normal form: L C R U 3,1 5,0 0,0 M 2,0 4,4 0,0 D 0,0 0, 1 0,0 This stage game is infinitely repeated. The players' discount factor is 8 = (0,1). i. ii. Use Friedman Folk Theorem and a graph to identify the set of payoffs that can arise in a SPNE when 8 is sufficiently close to one. Give the precise strategies for player 1 and player 2 that would generate an average payoff of 4 for each player. Calculate the minimum value of 8 that will make your strategy profile a SPNE.

Question 5 Consider the following game in normal form: L C R U 3,1 5,0 0,0 M 2,0 4,4 0,0 D 0,0 0, 1 0,0 This stage game is infinitely repeated. The players' discount factor is 8 = (0,1). i. ii. Use Friedman Folk Theorem and a graph to identify the set of payoffs that can arise in a SPNE when 8 is sufficiently close to one. Give the precise strategies for player 1 and player 2 that would generate an average payoff of 4 for each player. Calculate the minimum value of 8 that will make your strategy profile a SPNE.

Microeconomic Theory
Microeconomic Theory
12th Edition
ISBN:9781337517942
Author:NICHOLSON
Publisher:NICHOLSON
Chapter8: Game Theory
Section: Chapter Questions
Problem 8.9P
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Question 5 Consider the following game in normal form: L C R U 3,1 5,0 0,0 M 2,0 4,4 0,0 D 0,0 0, 1 0,0 This stage game is infinitely repeated. The players' discount factor is 8 = (0,1). i. ii. Use Friedman Folk Theorem and a graph to identify the set of payoffs that can arise in a SPNE when 8 is sufficiently close to one. Give the precise strategies for player 1 and player 2 that would generate an average payoff of 4 for each player. Calculate the minimum value of 8 that will make your strategy profile a SPNE.
Transcribed Image Text:Question 5 Consider the following game in normal form: L C R U 3,1 5,0 0,0 M 2,0 4,4 0,0 D 0,0 0, 1 0,0 This stage game is infinitely repeated. The players' discount factor is 8 = (0,1). i. ii. Use Friedman Folk Theorem and a graph to identify the set of payoffs that can arise in a SPNE when 8 is sufficiently close to one. Give the precise strategies for player 1 and player 2 that would generate an average payoff of 4 for each player. Calculate the minimum value of 8 that will make your strategy profile a SPNE.
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