Answered: Note: All items in the exam are worth…

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Transcribed Image Text:Note: All items in the exam are worth approximately 3.7 points each. Part 1: Short Questions 1. Consider the stage game represented by the matrix below, in which, as usual, Player 1 is the row player and Player 2 is the column player. The players chose their actions simultaneously. L C R T2L2, 0 -2, 0 K 2-3 5-2 -1,-1 V 0,2 4, 4 0,5 B 1,0 2, 2 3.3 Assume that this game is played twice by the same players, with no discounting. Consider the following strategy profile (that is, one strategy for each player): Player 1: Play V in the first period; in the second period, play V if (V, C) was played in period 1, and play 7 otherwise. Player 2: Play C in the first period; in the second period, play C if (V,C) was played in period 1, and play L otherwise. Which of the following statements about this strategy is true? This strategy is an SPNE of the repeated game (b) There is not enough information to determine whether this strategy is an SPNE of the repeated game (c) This strategy is not properly defined; that is, it does not specify what the players do in each one of their information sets (d) This strategy is not an SPNE of the repeated game (e) More than one of the options above is correct C 90 2

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