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Consider the stage game below. Assume that player P1 has a discount factor d₁ € [0, 1), and player P2 has a potentially different discount factor 8₂ € [0, 1). P1 (a) Any 8₁ € [0, 1) (b) ₁ ≥ 1/4 (c) ₁ ≥ 1/2 (d) ₁ ≥ 3/4 (e) ₁ = 2 P2 L R U 9,5 5,6 D 6,10 4,11 If the stage game above is repeated an infinite amount of times, what is the re- quirement on √₁—the discount factor for Player 1—such that we can have a SPNE of this game where both players use a "Grim Trigger" strategy and play (D, L) in every round of the equilibrium path?

Consider the stage game below. Assume that player P1 has a discount factor d₁ € [0, 1), and player P2 has a potentially different discount factor 8₂ € [0, 1). P1 (a) Any 8₁ € [0, 1) (b) ₁ ≥ 1/4 (c) ₁ ≥ 1/2 (d) ₁ ≥ 3/4 (e) ₁ = 2 P2 L R U 9,5 5,6 D 6,10 4,11 If the stage game above is repeated an infinite amount of times, what is the re- quirement on √₁—the discount factor for Player 1—such that we can have a SPNE of this game where both players use a "Grim Trigger" strategy and play (D, L) in every round of the equilibrium path?

ENGR.ECONOMIC ANALYSIS
ENGR.ECONOMIC ANALYSIS
14th Edition
ISBN:9780190931919
Author:NEWNAN
Publisher:NEWNAN
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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* Please be advised this is for practice preperation only ** i just really need help on this - I dont undertsand 

Consider the stage game below. Assume that player P1 has a discount factor d₁ € [0, 1), and player P2 has a potentially different discount factor 8₂ € [0, 1). P1 (a) Any 8₁ € [0, 1) (b) ₁ ≥ 1/4 (c) ₁ ≥ 1/2 (d) ₁ ≥ 3/4 (e) ₁ = 2 P2 L R U 9,5 5,6 D 6,10 4,11 If the stage game above is repeated an infinite amount of times, what is the re- quirement on √₁—the discount factor for Player 1—such that we can have a SPNE of this game where both players use a "Grim Trigger" strategy and play (D, L) in every round of the equilibrium path?
Transcribed Image Text:Consider the stage game below. Assume that player P1 has a discount factor d₁ € [0, 1), and player P2 has a potentially different discount factor 8₂ € [0, 1). P1 (a) Any 8₁ € [0, 1) (b) ₁ ≥ 1/4 (c) ₁ ≥ 1/2 (d) ₁ ≥ 3/4 (e) ₁ = 2 P2 L R U 9,5 5,6 D 6,10 4,11 If the stage game above is repeated an infinite amount of times, what is the re- quirement on √₁—the discount factor for Player 1—such that we can have a SPNE of this game where both players use a "Grim Trigger" strategy and play (D, L) in every round of the equilibrium path?
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