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?
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?](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F3b467211-d9ab-48da-a577-ab909af08c2d%2F2e33bc1a-ea2a-43f2-b564-cccf48c4c8d1%2Fis70kx8_processed.png&w=3840&q=75)
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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