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Question 3 Consider the following two-player extensive form game with complete information. In this game, colony A is controlled by country B. Country B receives
Question 3 Consider the following two-player extensive form game with complete information. In this game, colony A is controlled by country B. Country B receives revenue from both direct taxes on the population of A as well as revenue from the control of A 's natural resources. In the first stage of the game, colony A decides whether to Revolt (R) or continue to Consent (C) to the status quo arrangement. If A revolts, country B must decide whether to grant independence G or suppress S the revolt. If B suppresses the revolt, the situation will escalate into a costly war over control of the natural resources worth a payoff of " 4 " to whoever wins. Let the probability that colony A wins the war be denoted by p. Starting a revolution costs colony A " 1 " if country B does not suppress. In the event country B does suppress the revolt, it costs both A and B " 6 ." If A does not revolt, B can continue to tax T the residents of colony A for a transfer of "2" or it can eliminate E the taxes. The structure and payoffs can be described in the following game tree. If we assume that p(0,1) - i.e., 0
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