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 ....
View Full Document
This note was uploaded on 12/21/2009 for the course ECON 1211 taught by Professor Govel during the Spring '08 term at Columbia.
- Spring '08