v Question Completion Status Player il Player il Player Pla

v Question Completion Status: Player il Player il Player || Player A 1,1,-1 4,4,4 B 7,5,7-1,6,3 Player| A 3,3,0 3,1,7 -1,1,8 3,1,4 Consider the stage game above and suppose it is repeated twice without discounting. Consider all possible SPNE in pure strategies for the twice repeated game. The highest payoff Player 1 can get in a SPNE is The highest payoff Player 2 can get in a SPNE is . Finally, the highest payoff Player 3 can get in a SPNE is - (Please, enter only numerical answers like: 1, 2, 3, ..) QUESTION 6 Player Il CD A 3,2 0,1 B 7,0 2,1 Player Consider the stage game above and suppose it is repeated infinitely many times. For (A,C) to be played every period as a SPNE using trigger strategies the discount factor needs to be more than or equal to L. (Please, enter a numerical value not in fractional form; i.e., instead of 1/2 enter 0.5) auESTION7 Click Save and Submit to save and submit. Click Save All Answers to save all answers. Save All Answers TA OU QUE O OF OAK OO? ES

Solution

Question 6

The Nash equilibrium of the game is (B, D).

In order to sustain the (A,C) , the trigger strategy must give the payoff:

U(TS) = 3+3+3^2+…

U(TS) = 3/(1-)

Payoff from deviation U(D)

U(D) = 7+2+2^2+….

U(D) = 7+2/(1-)

To sustain the Trigger strategy, U(TS)>U(D)

3/(1- ) >=7+2 /1-

3>=7(1- )+2

3> =7-5

5 >=4

> = 4/5 = 0.8