A problem with many games is that they can have multiple Nash equilibria. This makes it difficult to predict the outcome of the game. As an illustration of a non- cooperative game with multiple equilibria, consider the following payoff table. The first number in each payoff pair is the payoff to country 2:

Required

a. Identify three Nash equilibria of this game.

b. Suppose that this game will be repeated a known, finite number of times. Suppose that the current equilibrium is in the lower left portion of the table. Describe an action by country 1 that would cause a shift to a new equilibrium.

c. Suppose that the game will be repeated an indefinite (i. e., infinite) number of times. What equilibrium would you then predict? Explain.

Transcribed Image Text:

Country 1 Violate 50, 200 Keep 100, 100 Keep Country 2 Violate 200, 50 50, 50