Terms for reference: NE: Nash Equilibrium/Equilibria SPNE: Subgame Perfect Nash Equilibria Note that when I ask for NE/SPNE, I am asking for these in pure strategies. No need to go look up the meaning of a mixed strategy NE. Q1 Two firms have both been illegally polluting a nearby river. The pollution is common knowledge between the firms. If no one reports any pollution, the government never finds out (or at least can't prove anything), and no one pays a fine. If at least one firm voluntarily reports their own pollution, the government discovers the polluting activity of both firms. In this case, reporting firms pay a small fine, and non-reporting firms pay a big fine. Thus, the game looks like this (payoffs are quarterly profits in millions after potential fines): Firm 2 Firm 1 Report Don't report Report 10, 10 10, 0 Don't report 0, 10 20, 20 a. Find all NE. Now suppose Firm 2 observes Firm 1's move before deciding whether to report; everything else remains the same. b. Is this a game of perfect or imperfect information? c. How many information nodes does player 2 have? d. Find all NE of this dynamic game. e. Find all SPNE