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Questions With the above introduction in mind, consider a game between Congress and President over two national expenditure items: Urban Renewal (U) & Missile Upgrade
Questions With the above introduction in mind, consider a game between Congress and President over two national expenditure items: Urban Renewal (U) & Missile Upgrade (M). Assume that Congress likes the former and President likes the latter, but both prefer a package of the two to none. The payoffs to each player are summarized through the payoffs as below: Payoff to Outcomes (Bill Passed) Payoff to Congress President Both U & M 3 3 U Only 4 M Only Neither 2 2 Now consider the following two games, respectively: Game I: " Stage 1: Congress proposes one of the following four bills: U&M, U only, M only, Neither. " Stage 2: Then President decides whether (i) to sign the bill or (ii) veto the bill. " Stage 1: Congress proposes one of the following four bills: * Game II: U&M, U only, M only, Neither. " Stage 2: Then President decides whether to sign or veto the bill. If both U&M were submitted, President has the right to (i) sign both or (ii) veto U (i.e. sign M) only) or (iii) veto M (i.e. sign U) only or (iv) veto both. (1) Draw game trees specifying all relevant game elements including the payoffs and find subgame perfect Nash equilibrium for Game I and Game II, respectively. (2) Briefly describe what lessons you can derive from this exercise
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