(The Beckhams' dilemma) Victoria and David are husband and wife. They both prefer ciean to dirty house but neither likes to clean the house. Their payoffs are given in the table below. Victoria Don't clean 0,8 Clean Clean 5,5 David Don't clean 8,0 1,1 a) Let say they play the clean house game only once, what is the Nash equilibrium? b) Let say Victoria and David has to decide whether to clean or not every day for indefinite number of days. How grim-trigger strategy will be our subgame perfect Nash equilibrium? In other words, what is the patience rate that ensure Victoria and David maintain the cleanliness of the house?

(The Beckhams' dilemma) Victoria and David are husband and wife. They both prefer ciean to dirty house but neither likes to clean the house. Their payoffs are given in the table below. Victoria Don't clean 0,8 Clean Clean 5,5 David Don't clean 8,0 1,1 a) Let say they play the clean house game only once, what is the Nash equilibrium? b) Let say Victoria and David has to decide whether to clean or not every day for indefinite number of days. How grim-trigger strategy will be our subgame perfect Nash equilibrium? In other words, what is the patience rate that ensure Victoria and David maintain the cleanliness of the house?

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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