Consider the Organization of Otter Exporting Countries playing a repeated game as described in Problems 8 and

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Consider the Organization of Otter Exporting Countries playing a repeated game as described in Problems 8 and 9. Assume, however, that your opponent is playing a tit-for-tat strategy rather than a grim trigger.

a. What stream of profits will you generate if you always cooperate and your opponent follows the tit-for-tat strategy?

b. What stream of profits will you generate if you defect once against an opponent playing a tit-for-tat strategy?

c. Assume that d = 0.5. Is it worthwhile to defect once against such an opponent? And if it’s worthwhile to defect once, should it be worthwhile to defect more than once should the game last that long?

d. What value for d makes defecting worthwhile? How does the value of defecting change as d changes?

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Microeconomics

ISBN: 9781319105563

3rd Edition

Authors: Austan Goolsbee, Steven Levitt, Chad Syverson

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