Consider the stage game shown in Table "SPNE in a repeated game". Suppose this game is played twice. What are the minimum values of d and 82 that are needed to support the play of a3, bị in the first stage as part of an SPNE? Table: SPNE in a repeated game

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Chapter1: Making Economics Decisions
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Consider the stage game shown in Table "SPNE in a repeated game". Suppose
this game is played twice. What are the minimum values of 81 and d2 that are
needed to support the play of a3, b₁ in the first stage as part of an SPNE?
Table: SPNE in a repeated game
2
b₁
b₂
b3
(61
(10,10)
(2,12)
(0,13)
1
(2
(12,2)
(5,5)
(0,0)
(13,0)
(0,0)
(1,1)
1) Play of a3, b1 in the first stage cannot be supported as part of an SPNE
for any 6₁ and 2 values between 0 and 1.
2) 1 ≥ 1/4 and 8₂ ≥ 1/2.
3) 1 1/2 and 62 ≥ 1/4.
4) 61 ≥ 0 and ₂ ≥ 1/4.
5) None of the above.
Transcribed Image Text:Consider the stage game shown in Table "SPNE in a repeated game". Suppose this game is played twice. What are the minimum values of 81 and d2 that are needed to support the play of a3, b₁ in the first stage as part of an SPNE? Table: SPNE in a repeated game 2 b₁ b₂ b3 (61 (10,10) (2,12) (0,13) 1 (2 (12,2) (5,5) (0,0) (13,0) (0,0) (1,1) 1) Play of a3, b1 in the first stage cannot be supported as part of an SPNE for any 6₁ and 2 values between 0 and 1. 2) 1 ≥ 1/4 and 8₂ ≥ 1/2. 3) 1 1/2 and 62 ≥ 1/4. 4) 61 ≥ 0 and ₂ ≥ 1/4. 5) None of the above.
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