10) Consider a repeated game in which the following one-shot game between two players is repeated "infinitely." Denote by "d" the discount factor. (Assume both players have the same discount factor.)       Player 2     Cooperate Defect Player 1 Cooperate 5, 4 0, 5 Defect 6, 0 1, 1   The two players try to support cooperation by using "grim trigger strategy" as discussed in class. Answer YES or NO to each of the following three questions.   (a) Can they support cooperation if the common discount factor, d, is equal to 0.23?   (b) Can they support cooperation if the common discount factor, d, is equal to 0.4?    (c) Can they support cooperation if the common discount factor, d, is equal to 0.15?

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10) Consider a repeated game in which the following one-shot game between two players is repeated "infinitely." Denote by "d" the discount factor. (Assume both players have the same discount factor.)

 

    Player 2
    Cooperate Defect
Player 1 Cooperate 5, 4 0, 5
Defect 6, 0 1, 1

 

The two players try to support cooperation by using "grim trigger strategy" as discussed in class. Answer YES or NO to each of the following three questions.

 

(a) Can they support cooperation if the common discount factor, d, is equal to 0.23?

 

(b) Can they support cooperation if the common discount factor, d, is equal to 0.4? 

 

(c) Can they support cooperation if the common discount factor, d, is equal to 0.15?

 

QUESTION 8
Manager C
Effort Level
Chance of
Cost of
effort
success
High Effort
0.9
100,000
Routine
Effort
0.5
60,000
What is the minimum bonus that will entice high effort?
O 1. 40,000
2. 260,000
3. 300,000
4. 400,000
5. 520,000
O 6. 60,000
O 7. 100,000
8.0
Transcribed Image Text:QUESTION 8 Manager C Effort Level Chance of Cost of effort success High Effort 0.9 100,000 Routine Effort 0.5 60,000 What is the minimum bonus that will entice high effort? O 1. 40,000 2. 260,000 3. 300,000 4. 400,000 5. 520,000 O 6. 60,000 O 7. 100,000 8.0
QUESTION 9
Consider a repeated game in which the following one-shot game between two players is repeated "infinitely." Denote by "d" the discount factor.
Player 2
Cooperate
Defect
Cooperate
4, 4
0,6
Player 1
Defect
6,0
1, 1
The two players try to support cooperation by using "grim trigger strategy" as discussed in class. Answer the following questions:
(a) Write down the simplified version of the present value of the payoff stream if the players decide to cooperate at some given period.
(b) Write down the simplified version of the present value of the payoff stream if the players decide to defect at that same period.
(c) What is the precise condition on the discount factor, d, that would support cooperation by these two players using grim trigger strategy.
Transcribed Image Text:QUESTION 9 Consider a repeated game in which the following one-shot game between two players is repeated "infinitely." Denote by "d" the discount factor. Player 2 Cooperate Defect Cooperate 4, 4 0,6 Player 1 Defect 6,0 1, 1 The two players try to support cooperation by using "grim trigger strategy" as discussed in class. Answer the following questions: (a) Write down the simplified version of the present value of the payoff stream if the players decide to cooperate at some given period. (b) Write down the simplified version of the present value of the payoff stream if the players decide to defect at that same period. (c) What is the precise condition on the discount factor, d, that would support cooperation by these two players using grim trigger strategy.
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