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Unformatted text preview: – Play { b } in all periods as long as player 2 has always played { l } – Play { c } if player 2 has ever played something other than { l } Player 2: – Play { l } in all periods as long as player 2 has always played { b } – Play { j } if player 2 has ever played something other than { b } • So the ﬁrst question is who might have an incentive to deviate from the cooperation point. Clearly it is player 1. • Now let see if our strategy can convince player 1 not to deviate: 1 Hence the confusion in class. 1 – If he cooperates he gets 4 1δ = 40 – If he defects he gets 5 + 3 δ 1δ = 32 – So clearly he will not want to defect • Is it expost rational? In other words, will player 1 have any incentive to deviate from this strategy? – Given that they are playing at the threat point, { c;j } neither player will have an incentive to deviate – Thus it is a SPE 2...
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 Fall '10
 Power
 Game Theory, Nash, nash trigger, individually rational play

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