A country is ruled by a military junta. The two key members do not really trust each other, and are considering whether to try and oust the other. General Madine has the first opportunity to launch a coup. Admiral Adama can respond by attempting to launch his own coup. Admiral Adama will know whether General Madine launched a coup when he makes his own decisions. If neither launches a coup, the junta stays intact. This is the status quo, which each value at 0. If only one launches a coup, that coup is guaranteed to succeed. If both launch a coup, the outcome will be decided probabilistically (think a nature node). General Madine will successfully oust Admiral Adama 40% of the time, and Admiral Adama will succeed 60% of the time. General Madine values gaining sole power at 100 utility and being ousted at -100. Admiral Adama values gaining sole power at 50 utility and being ousted at -200. Draw the game. Then, find the SPNE of the overall game. What will each player do.

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Answered: A country is ruled by a military junta.…

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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A country is ruled by a military junta. The two key members do not really trust each other, and are considering whether to try and oust the other. General Madine has the first opportunity to launch a coup. Admiral Adama can respond by attempting to launch his own coup. Admiral Adama will know whether General Madine launched a coup when he makes his own decisions. If neither launches a coup, the junta stays intact. This is the status quo, which each value at 0. If only one launches a coup, that coup is guaranteed to succeed. If both launch a coup, the outcome will be decided probabilistically (think a nature node). General Madine will successfully oust Admiral Adama 40% of the time, and Admiral Adama will succeed 60% of the time. General Madine values gaining sole power at 100 utility and being ousted at -100. Admiral Adama values gaining sole power at 50 utility and being ousted at -200. Draw the game. Then, find the SPNE of the overall game. What will each player do.

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