Payoffs with a common discount factor

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Consider the repeated play of a prisoner's dilemma game, whose payoffs are given in the following payoff matrix:

P1/P2

C

D

C

(3, 3)

(0, 5)

D

(5, 0)

(2, 2)

a) Suppose the game is played only three times. Then, how many subgames (including the entire game) do we have? and what is a sub-game Perfect Nash Equilibrium?

b) Suppose the game is played indefinitely and players discount future payoffs with a common discount factor δ. Find the range of a discount factor which can sustain cooperation, i.e., repeated play of (C, C), by employing the trigger strategies.

Reference no: EM132098752

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