EXERCISE 173.4 *rmy 1, of country 1, must decide whether to attack army 2, of country 2, which is occupying an island between the two coun- tries. In the event of an attack, army 2 may fight; or retreat over a bridge to its mainland. Each army prefers to occupy the island than not to occupy it; a fight is the worst outcome for both armies. Model this situation as an extensive game with perfect information and show that army 2 can increase its subgame perfect equi- librium payoff (and reduce army 1's payoff) by burning the bridge to its mainland (assume this act entails no cost), eliminating its option to retreat if attacked.

EXERCISE 173.4 *rmy 1, of country 1, must decide whether to attack army 2, of country 2, which is occupying an island between the two coun- tries. In the event of an attack, army 2 may fight; or retreat over a bridge to its mainland. Each army prefers to occupy the island than not to occupy it; a fight is the worst outcome for both armies. Model this situation as an extensive game with perfect information and show that army 2 can increase its subgame perfect equi- librium payoff (and reduce army 1's payoff) by burning the bridge to its mainland (assume this act entails no cost), eliminating its option to retreat if attacked.

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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