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.
Chapter1: Making Economics Decisions
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![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.](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2Fcc93dd3a-e660-4464-bc8c-e382a2c34aae%2Fdeb20a73-dc61-4563-a49e-31023b8e771d%2F2y5y8h_processed.png&w=3840&q=75)
Transcribed Image Text: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.
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