Consider a repeated game in which the following one-shot game between two players is repeated infinitely. Denote by d the discount factor. Player 2 Cooperate
Consider a repeated game in which the following one-shot game between two players is repeated "infinitely." Denote by "d" the discount factor. Player 2 Cooperate Defect Cooperate 4, 4 0, 6 Player 1 Defect 6,0 1, 1 The two players try to support cooperation by using "grim trigger strategy" as discussed in class. Answer the following questions: (a) Write down the simplified version of the present value of the payoff stream if the players decide to cooperate at some given period. (b) Write down the simplified version of the present value of the payoff stream if the players decide to defect at that same period. (c) What is the precise condition on the discount factor, d, that would support cooperation by these two players using grim trigger strategy
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