10 Consider an infinitely repeated game where players play the static Prisoner's Dilemmagame in table 1 each period.Player 2CDC x, x | 0, yPlayer 1D y, 0 1,1Table 1: The GameSuppose 1 < x < y. Players have discount factor, 8. Suppose both players follow agrim trigger strategy. Find the conditions on d under which the strategies form a Nashequilibrium and cooperation is sustained in all periods. (I.e., find a condition on theplayer's patience such that players choose to cooperate in every period.)How does d depend on x? What happens as x → 1 or x → y. What is the intuitionbehind the results?

Given, Infinitely Repeated gameThere are two players : Player1 and Player2Both Players have two…

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Consider an infinitely repeated game where players play the static Prisoner's Dilemma game in table 1 each period.

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Chapter1: Making Economics Decisions

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Question

Consider an infinitely repeated game where players play the static Prisoner's Dilemma
game in table 1 each period.
Player 2
C
D
C x, x | 0, y
Player 1
D y, 0 1,1
Table 1: The Game
Suppose 1 < x < y. Players have discount factor, 8. Suppose both players follow a
grim trigger strategy. Find the conditions on d under which the strategies form a Nash
equilibrium and cooperation is sustained in all periods. (I.e., find a condition on the
player's patience such that players choose to cooperate in every period.)
How does d depend on x? What happens as x → 1 or x → y. What is the intuition
behind the results?

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