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Hi , please help with this question on ECO202 . Thank you . . A small economy has 2 banks, Delta Bank (DB) and Omega
Hi , please help with this question on ECO202 . Thank you .
. A small economy has 2 banks, Delta Bank (DB) and Omega Bank (OB). Both banks have to decide whether to charge high or low interest rates. If both banks charge high interest rate, DB will earn $20m while OB will earn $8m. If both banks charge low interest rate, DB will earn $25m while OB will earn $40m. If DB charges high interest rate while OB charges low interest rate, DB will earn $30m will OB will earn $6m. If DB charges low interest rate while OB charges high interest rate, DB will earn $7m will OB will earn $50m. (a) Construct the payoff matrix in terms of earning for both banks . (b) Solve for the Nash equilibrium . (c) Explain whether this is a prisoner's dilemma gameStep by Step Solution
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