The following table contains the possible actions and payoffs of players 1 and 2. Player 2 Cooperate Not Cooperate Player Cooperate 15 , 15 -20 , 20 1 Not Cooperate 20 , -10 10 , 10 This game is infinitely repeated, and in each period both players must choose their actions simultaneously. If both players follow a tit-for-tat strategy, then they can Cooperate in equilibrium if the interest rate r is . At an interest rate of r=0.5, . If instead of playing an infinite number of times, the players play the game only 10 times, then in the first period player 1 receives a payoff of
The following table contains the possible actions and payoffs of players 1 and 2. Player 2 Cooperate Not Cooperate Player Cooperate 15 , 15 -20 , 20 1 Not Cooperate 20 , -10 10 , 10 This game is infinitely repeated, and in each period both players must choose their actions simultaneously. If both players follow a tit-for-tat strategy, then they can Cooperate in equilibrium if the interest rate r is . At an interest rate of r=0.5, . If instead of playing an infinite number of times, the players play the game only 10 times, then in the first period player 1 receives a payoff of
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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The following table contains the possible actions and payoffs of players 1 and 2.
|
|
|
Player 2 |
|
|
|
|
Cooperate |
Not Cooperate |
|
Player |
Cooperate |
15 , 15 |
-20 , 20 |
|
1 |
Not Cooperate |
20 , -10 |
10 , 10 |
This game is infinitely repeated, and in each period both players must choose their actions simultaneously. If both players follow a tit-for-tat strategy, then they can Cooperate in equilibrium if the interest rate r is . At an interest rate of r=0.5, .
If instead of playing an infinite number of times, the players play the game only 10 times, then in the first period player 1 receives a payoff of
Transcribed Image Text:interest rate r is
<=0.5
>=0.5
<=1
>=1
both players Cooperate forever
both players play Not Cooperate forever
10
15
20
the players play
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