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Pl P2 Left Middle Right Left 4,2 3,3 1,2 Middle 3,3 5,5 2,6 Right 2,1 6,2 3,3 I. |15 points] Suppose that the game
Pl \\ P2 Left Middle Right Left 4,2 3,3 1,2 Middle 3,3 5,5 2,6 Right 2,1 6,2 3,3 I. |15 points] Suppose that the game is repeated for two periods and the players know that the game will end at the end of two periods. They observe the first period outcome before they move to the second period. Assume that there is no discounting, i.e. 2nd period payoffs are not discounted, or the discount factor is equal to 1. For each of the following outcomes, check whether it could occur in some subgame perfect equilibrium (SPE) of this twoperiod rgpeated game. Show your work and explain your reasoning. You can provide a general analysis that cover all parts a thru e, rather than analyzing them individually, but your answer must state for each of these cases whether the corresponding outcome can be observed as a subgameperfect equilibrium outcome of the twoperiod repeated game. 3) (Left, Left) is played in both periods. b) (Right, Right} is played in both periods. c) (Middle, Middle) is played in both periods. d) (Middle, Middle] is played in the rst period, followed by (Left, Left}. e) (Middle, Middle) is played in the rst period, followed by (Right, Right). II. \"5 points] Now suppose that the game is infinitely repeated. Denote the discount factor of the players as d. What is the threshold d* such that when d 2 d*, having the (Middle, Middle) outcome in all periods can be achieved as a subgame perfect equilibrium by grim trigger strategies
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