Suppose that this rate-setting game is played by the banks infinitely many times. Each bank has a discount rate of 8, meaning that $1 next period is worth $8 current period. For what values of & is this outcome (low rate, low rate) maintainable if Wilbur is playing the grim trigger strategy?

Suppose that this rate-setting game is played by the banks infinitely many times. Each bank has a discount rate of 8, meaning that $1 next period is worth $8 current period. For what values of & is this outcome (low rate, low rate) maintainable if Wilbur is playing the grim trigger strategy?

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Question

Please give me answer in half hour otherwise leave this question

Suppose that this rate-setting game is played
by the banks infinitely many times. Each bank
has a discount rate of 8, meaning that $1
next period is worth $8 current period.
For what values of 8 is this outcome (low
rate, low rate) maintainable if Wilbur is
playing the grim trigger strategy?
Templeton
High Rate
Low Rate
G
C
High Rate
20,20
10,80
Wilbur
Low Rate
80, 10
50,50

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