The third game (shown below) is the same as the second, except that cheaters are penalized for their behavior in the previous period. Those who expanded output during the first period loose everything they gained in that period. Nash Equilibrium (NE) A: Period 1 B: A X
The third game (shown below) is the same as the second, except that cheaters are penalized for their behavior in the previous period. Those who expanded output during the first period loose everything they gained in that period. Nash Equilibrium (NE) A: Period 1 B: A X
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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This is a connected question that requires the first answer to get the second. Thank you for your time.
Transcribed Image Text:The third game (shown below) is the same as the second, except that cheaters are penalized
for their behavior in the previous period. Those who expanded output during the first period
loose everything they gained in that period.
Nash Equilibrium
(NE)
A:
Period 1
B:
Period 2
Nash Equilibrium
(NE) A:
B:
X
X
X
X
4
A: 4
B: 1
X
X
A: 6
A: 4
A: 7
A: 5
A: 4
A: 2
A:5
A: 4
B: 6
B: 7
B: 4
B: 5
B: 3
B: 4
B:1
B: 3
a. Solve the game by the Rollback method. Identify the dominant strategies and circle
the Nash Equilibrium for each subgame and write it above its starting node. How
has the penalty changed the firm's behavior?
A
t
A: 2
B: 2
Nash Equilibrium
(NE) A:
B:
X
Transcribed Image Text:The second game (shown below) is a repeated game. It represents their behavior in two
successive periods. Within each period they act simultaneously, but recall what has happened
previously. In the second period, In the second period, the players acquire the same payoffs
they did in the first, while retaining the payoffs received in the first. The figure below shows
only two of the four possible subgames for the second period.
Nash Equilibrium
(NE)
A:
Period 1
B:
A
Period 2
Nash Equilibrium
(NE)
A:
B:
X
X
X
X
A: 4
B: 1
X
↑
X
A: 6
A: 4
A: 7
A: 5
A: 4
A: 2
A:5
A: 3
B: 6
B: 7
B: 4
B: 5
B: 7
B: 8
B:5
B: 6
a.
Solve the game by the Rollback method. Identify the dominant strategies and circle
the Nash Equilibrium for each subgame and write it above its starting node. Has the
player's behavior changed significantly? Why or why not?
A: 2
B: 2
Nash Equilibrium
(NE)
A:
B:
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