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Hello. I need some help understanding these problems. Thank you! Trust game Consider a version of the trust game in which player 1 (called A

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Hello. I need some help understanding these problems. Thank you!

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Trust game Consider a version of the trust game in which player 1 (called A in the original study) can send an amount a out of an endowment of 10 to player 2 (or B), which is then tripled (3a). In this sequential game, player 2 may then send an amount b to player 1 but no more than the amount player 2 has received. Specifically, suppose 1 can send one of only three amounts, 2, 6, or 10, and player 2 can return one of three amounts, 3, 9, or 15. Thus, their payoffs are as follows: x, =10-a+b, ac {L, M, H} = {2,6,10} X2 =30-b, be {L, M, H} = {3,9,15} whereby b 3a. 1. Calculate the payoffs of all feasible strategy pairs, {a, b} , and enter them in the table on the cover sheet. Suppose for problems 2 to 5 that players have egoistic preferences, specifically, u; = x, ,i = 1,2 . 2. What is 2's best response (L, M or H) to 1 choosing H? 3. What is 2's best response to 1 choosing M? 4. What is 2's best response to 1 choosing L? 5. What strategy pair, {a, b} , is the subgame perfect Nash equilibrium (HH, HM, HL, MH, MM, etc.)? You might find it helpful to draw a game tree. For the remaining problems in this section, consider a utility function that incorporates Rabin kindness (k; ) and perceived kindness (k, ) terms in addition to material utility: u, = x, + a, k, k,,i = 1,2 6. Calculate the fair payoffs to player 1, m , and to player 2, 72 , and enter them in the table on the cover sheet. In calculating fair payoffs, restrict attention only to payoffs that are feasible. 7. Calculate k, , the kindness of player 1 toward 2 (or, equivalently, the perceived kindness of 1 to 2) for each strategy and belief, and enter these as the first cell entries in the table on the cover sheet. Similarly, calculate k2, the kindness of player 2 toward 1 (or, equivalently, the perceived kindness of 2 to 1) for each strategy and belief, and enter as the second cell entries of the table. 8. Suppose now a, = 0 and 2 = 28. Calculate the utilities of the players, u, and u2 , and enter them in the table on the cover sheet. 9. What is 2's best response (L, M or H) to 1 choosing H?10. What is 2's best response to 1 choosing M? 11. What is 2's best response to 1 choosing L? 12. What strategy pair, {a, b} , is the subgame perfect Nash equilibrium

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