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Specify the spe if it is common knowledge

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Consider the repeated Prisoner's Dilemma game in which the payoffs of the stage game are given by T = 3, R = 2, P = 1, S = 0.

(a) Specify the SPE if it is common knowledge that the game is played exactly 3 times.

(b) Find the discount factors, if there are any, for which (Tit-For-Tat, Tit-For-Tat) is an SPE in the infinitely repeated game.

Use the following result, known as the one-deviation property, which applies to infinitely repeated games with a discount factor less than 1: a strategy profile is a subgame perfect equilibrium if and only if no player can increase her payoff by changing her action at the start of any subgame, given the other player's strategy and the rest of her own strategy.

Reference no: EM132482593

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