Two prospecting partners, Curtin and Dobbs, find an area containing 40 ounces of gold. For each day that they mine the area, they extract 10 ounces of gold. At night, Curtin and Dobbs alternately serve as watchman to protect the gold from passing thieves: Curtin on the first night, Dobbs on the second night, Curtin on the third night, and Dobbs on the fourth night. (If they reach the fifth day, they leave with their gold.) (a) Suppose that whoever is watchman on any given night can choose whether or not to run away with all of the gold they have collected so far. If the watchman on night k runs away then the game ends, he gets a payoff of 10k, and his partner gets a payoff of 0. If neither runs away on any night then they amass a total of 40 that they split equally, giving each a payoff of 20. Find a subgame perfect equilibrium of this game. (Note that the only choices here involve whether to run away with the gold at night; as long as the

Two prospecting partners, Curtin and Dobbs, find an area containing 40 ounces of gold. For each day that they mine the area, they extract 10 ounces of gold. At night, Curtin and Dobbs alternately serve as watchman to protect the gold from passing thieves: Curtin on the first night, Dobbs on the second night, Curtin on the third night, and Dobbs on the fourth night. (If they reach the fifth day, they leave with their gold.) (a) Suppose that whoever is watchman on any given night can choose whether or not to run away with all of the gold they have collected so far. If the watchman on night k runs away then the game ends, he gets a payoff of 10k, and his partner gets a payoff of 0. If neither runs away on any night then they amass a total of 40 that they split equally, giving each a payoff of 20. Find a subgame perfect equilibrium of this game. (Note that the only choices here involve whether to run away with the gold at night; as long as the

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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