1. Consider the stage game below and suppose it is repeated twice The following
ID: 1145871 • Letter: 1
Question
1. Consider the stage game below and suppose it is repeated twice
The following strategy profiles are stage Nash equilibria (select all that apply)
a.
(C,D)
b.
(B,E)
c.
(A,D)
d.
(A,F)
e.
(B,F)
f.
(C,E)
-------------------
2.
To sustain a SPNE in which players play (B,E) in every period by means of a trigger strategy, the discount rate must be larger than or equal to
a.
1/7.
b.
1/3
c.
2/3
d.
(B,E) cannot be part of a SPNE.
e.
3/7.
a.
(C,D)
b.
(B,E)
c.
(A,D)
d.
(A,F)
e.
(B,F)
f.
(C,E)
Player 2 D E F A 1,1,11,1 PlayerI B1,8 7,51,1 C5,78,31,1Explanation / Answer
1) ans is A
(C,D) is nash equilibrium.Nash equilibrium is a strategy where all players plays strategy in their best responsive way given the other players strategy and no player have any incentive to deviate.Also since there is no pareto improvement over (C,D) thus there cannot be other equilibrium.
2)D
(B,E) cannot be a part of SPNE because player 2 will never be ready to play E inated of C.
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