Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

The question i want answers to is question 3, question 2 is only posted because it is needed to answer question 3. 3. A commonly

The question i want answers to is question 3, question 2 is only posted because it is needed to answer question 3.

image text in transcribedimage text in transcribed
3. A commonly used alternative to a grim trigger strategy is called a tit- for-tat strategy, where instead of punishing a player who deviates from the proposed profile by never cooperating again, the other player only retaliates in the next stage. After this, a player will return to cooperating if the other did not retaliate in return. a) Utilising a game from Problem 2, try to construct a profile of tit-for-tat cooperating strategies that constitute SPNE and find the smallest discount factor that can support these. b) Using the results from 3a) and 2b), compare grim trigger and tit-for- tat strategies and discuss which one seems more reasonable to use and why.2. Two neighbouring countries have to decide whether they want to go to war or remain at peace. If countries remain at peace, their payoff is 1. If one country decides to go to war, its payoff is 4, while the other's is -2. If both countries go to war, their payoffs are -1. a) Assume the game lasts for five periods. Find all subgame-perfect Nash Equilibria. b) Now assume the game lasts infinitely. Formulate a profile of grim trig- ger strategies which rewards countries that stay at peace indefinitely and find the smallest discount factor that can support such strategies as a subgame- perfect NE

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Moral Controversies In American Politics

Authors: Raymond Tatalovich, Warren Tatalovich

4th Edition

1317464427, 9781317464426

More Books

Students also viewed these Economics questions

Question

1. To understand how to set goals in a communication process

Answered: 1 week ago