3. Two players play the following normal form game. 1\2 Left Middle Right Left 4,2 3,3 1,2 Middle 3,3 5,5 2,6 2,1 6,2 Right 3,3 Suppose that there is a probability p that the game continues next period and a probability (1-p) that it ends. What is the threshold p* such that when p≥ p* (Middle, Middle) is sustainable as a subgame perfect equilibrium by grim trigger strategies, but when p < p playing Middle in all periods is not a best response? [Here the grim strategy is: play Middle if the play in all previous periods was (Middle, Middle); play Right otherwise.] a) 1/2; Ob) 1/3; Oc) 1/4; Od) 2/5.

3. Two players play the following normal form game. 1\2 Left Middle Right Left 4,2 3,3 1,2 Middle 3,3 5,5 2,6 2,1 6,2 Right 3,3 Suppose that there is a probability p that the game continues next period and a probability (1-p) that it ends. What is the threshold p* such that when p≥ p* (Middle, Middle) is sustainable as a subgame perfect equilibrium by grim trigger strategies, but when p < p playing Middle in all periods is not a best response? [Here the grim strategy is: play Middle if the play in all previous periods was (Middle, Middle); play Right otherwise.] a) 1/2; Ob) 1/3; Oc) 1/4; Od) 2/5.

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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