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n5 - M,M then play L In the ﬁrst period given that player...

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Economics 405/505 Introduction to Game Theory Prof. Rui Zhao Repeated Games Stage game: L M R L (1, 1) (5, 0) (1, 0) M (0, 5) (4, 4) (0, 0) R (0, 1) (0, 0) (3, 3) There are two pure-strategy Nash: ( L,L ), ( R,R ). In the twice-repeated game, there is an SPE as follows: Each player i : plays M in the ﬁrst period; if the ﬁrst-period play was ( M,M ) then play R in the second period, if the ﬁrst-period play is not
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Unformatted text preview: ( M,M ) then play L . In the ﬁrst period, given that player 2 plays M , player 1’s choices and corresponding total payoﬀs are as follows: • chooses M , then payoﬀ = 4 + 3 =7; • deviates from M to L then payoﬀ = 5 + 1 = 6; • deviates from M to R then payoﬀ = 0 + 1 = 1. Clearly, player’s best action is M. 1...
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