WeekofMarch02_solns

WeekofMarch02_solns - Recitation Week of Solutions 1 a...

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Unformatted text preview: Recitation Week of 03/02/09 Solutions 1) a) Using backward induction, the only SPNE is (T, T), resulting in payoffs of ሺ ଵ ଶ , 1ሻ . b) No, in a finitely repeated game with 1 NE per stage game, players will always play the stage game NE. Regardless of what either player has done in period 1, player ݅ should tell in period 2. c) According to this strategy, if both players are always silent, ܸ ൌ ଷ ଵିఋ ௘௤ ൌ 3 ൅ 3ߜ ൅ 3ߜ ଶ ൅ … . If player 1 deviates, ܸ ଵ ௗ௘௩ ൌ 4 ൅ ଵ ଶ ߜ ൅ ଵ ଶ ߜ ଶ ൅ ڮ ൌ 4 ൅ ఋ ଶሺଵିఋሻ , and ܸ ଶ ௗ௘௩ ൌ ఋ ଵିఋ . If player 2 deviates, ܸ ଶ ௗ௘௩ ൌ ଻ ଶ ൅ ఋ ଵିఋ , and ܸ ଵ ௗ௘௩ ൌ ఋ ଶሺଵିఋሻ . This strategy has the SPNE of player ݅ always being silent if ଵି ଷ ఋ ൒ 4 ൅ ఋ ଶሺଵିఋሻ and ଵିఋ ଷ ൒ ଻ ଶ ൅ ఋ ଵିఋ ....
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This note was uploaded on 12/21/2009 for the course ECON 1211 taught by Professor Govel during the Spring '08 term at Columbia.

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