Question
3. Consider a simple Trust Game. In this game, player 1 first chooses whether to trust player 2, and then, if player 1 trusts player
3. Consider a simple Trust Game. In this game, player 1 first chooses whether to trust player 2, and then, if player 1 trusts player 2, player 2 can either reward that trust, or betray player 1. Suppose the payoffs for this game are as follows: Initially there is a $20 pot of money. If player 1 does not trust player 2, then they split the $20 evenly. If player 1 does trust player 2, then the pot size increases to $30, and player 2 can decide to split the new, larger pot evenly, or keep it all for themself. a) Draw the game tree for this game. b) Play a few rounds of this game in class. c) What is the (subgame perfect) Nash Equilibrium of this sequential game.
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