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2008SpringHomework4

# 2008SpringHomework4 - SABANCI UNIVERSITY ECON 201 A GAMES...

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SABANCI UNIVERSITY ECON 201 – A GAMES AND STRATEGY ASSIGNMENT 4 Date due: May 15, 2008, at 11.30 Late submissions will not be accepted Instructor: Mehmet Baç Total points: 100. 1. ( 25 points ). Bonnie and Clyde are playing a simultaneous-move stage game (a prisoner’s dilemma to which a third strategy is added) as shown below . They play this game two times; they learn the first-round strategies and then play the second- round . Is there a SPE in which the players cooperate in the first round? If yes show it, if not, explain why there is none. Clyde Bonnie Cooperate Don’t Cooperate Defect Cooperate 1 , 1 -2 , 2 -5, -5 Don’t Cooperate 2, -2 0 , 0 -5, -5 Defect -5, -5 -5 -5 -1, -1 2. ( 30 points ) Kanga has one kilo of honey, which she would not sell at a price below 20TLs (reservation price). Winnie is willing to pay up to 40TLs for this honey. Kanga offers a price P 1 to Winnie. If Winnie accepts, he gets the payoff 40 – P 1 and Kanga gets the payoff P 1 and the game ends. If Winnie rejects, the game proceeds to the next round where any positive payoff is multiplied by the common discount factor δ. In the beginning of round 2, a random event determines the deadline D of bargaining:

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2008SpringHomework4 - SABANCI UNIVERSITY ECON 201 A GAMES...

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