Suppose that the following prisoner's dilemma game (stage game) is played repeatedly and players discount future payoffs with the common discount factor δ <1.  a)    Carefully specify the strategy spaces for both players, draw the extensive form game and find a subgame perfect Nash equilibrium when the stage game is played twice, and both players observe the outcome of the first play.

ENGR.ECONOMIC ANALYSIS
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Chapter1: Making Economics Decisions
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Suppose that the following prisoner's dilemma game (stage game) is played repeatedly and players discount future payoffs with the common discount factor δ <1. 

a)    Carefully specify the strategy spaces for both players, draw the extensive form game and find a subgame perfect Nash equilibrium when the stage game is played twice, and both players observe the outcome of the first play.

12
C
D
C
25, 25
40, 0
D
0, 40
5,5
Transcribed Image Text:12 C D C 25, 25 40, 0 D 0, 40 5,5
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