Q2 Consider a repeated game with two players and two rounds.The stage game is shown below. Assume the players have acommon discount factor & e (0, 1). Which of the following isNOT TRUE?LMH3, 32, 112, 01, 2|6, 6|0,00, 120, 0|10, 10O There doesn't exist any discount factor such that (H,H) will beplayed in the first period since the game is finite.If payoff for (L,L) is (0,0), then there is no way to sustain (H,H) inthe first period.There is a SPNE where the two firms play (L, L) in the first periodand (M,M) in the second period.O If the stage game is repeated for 3 times instead of 2, then theminimum $\delta$ such that there is a SPNE where (H,H) isplayed in the fırst round is smaller.There are 2 pure strategy NE and 1 mixed strategy NE for thestage game.

Answered: Consider a repeated game with two…

Consider a repeated game with two players and two rounds. The stage game is shown below. Assume the players have a common discount factor & e (0, 1). Which of the following is NOT TRUE?

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Concept explainers

Comparative Advantage and Absolute Advantage Analysis

The theory of absolute advantage was given by Adam Smith in the year 1776.

Question

Consider a repeated game with two players and two rounds.
The stage game is shown below. Assume the players have a
common discount factor & e (0, 1). Which of the following is
NOT TRUE?
L
M
H
3, 3
2, 1
12, 0
1, 2
|6, 6
|0,0
0, 12
0, 0
|10, 10
O There doesn't exist any discount factor such that (H,H) will be
played in the first period since the game is finite.
If payoff for (L,L) is (0,0), then there is no way to sustain (H,H) in
the first period.
There is a SPNE where the two firms play (L, L) in the first period
and (M,M) in the second period.
O If the stage game is repeated for 3 times instead of 2, then the
minimum $\delta$ such that there is a SPNE where (H,H) is
played in the fırst round is smaller.
There are 2 pure strategy NE and 1 mixed strategy NE for the
stage game.

Expert Solution

Step 1

There are two players : Player 1 & 2

Strategy set of both the players : { L , M , H }

Discount factor : $δ \in [0, 1]$

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