A consider the same game as in question above but suppose t

Reference no: EM13371867

(a) Consider the same game as in question above, but suppose T is not known.

Instead, we know that the game continues with probability d and ends with probability 1- d after each round with each player getting zero if the game ends (or, if you prefer, d is the discount factor). Is it possible to play (B, b) in each period if d = 0.8? What if d = 0.2?

(b) Consider the infinitely repeated version of the following game.

H D

H 1,1 3,0

D 0,3 2,2

The payoff of player 1, if (H, H) is played infinitely with discount factor or continuation

probability d, is 1 + d + d² + d³ + .....

Is (D, D) forever a SPNE outcome for d = 2/3? If it is, show the SPNE strategies. If it is not explained why.

If the game was played twice, would playing (D, D) in the first period be a subgame perfect equilibrium first-period outcome? Explain why or why not.

Reference no: EM13371867

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